Justin,
You didn't state what the strategy/type of investment property you are looking to acquire. I believe that will help guide you, and is the most important aspect of any investment, the exit strategy. I presume stated 18 mon timeline it's probably a flip.
Assuming that, you are prioritizing speed, control, convenience, and access to capital, with exceptionally strong cashflow individually. I presume you are going to be working fulltime, so you will have to pay for contractors and subs unless you're doing it yourself. Given that, look at the lowest transaction cost method for your entire pipeline of the project. (i.e. flip-(buy, fix, sell) is a cycle) ALWAYS.
Method 1: A LOC on existing assets with a 2x margin on your needs is favorable. (I.e. need $35k, get a line for $70k and only ever use 60% of your total LOC for any project to handle the inevitable unexpected contingencies.) Advantages: tax deductible interest if you use the funds ONLY for real estate projects and nothing else, ease of repayment, excellent leverage of current illiquid equity, almost no capital access costs, etc. Disadvantages: higher interest rate then other methods, but less than a credit card, credit reported, reduced operating leverage and ROI for the leveraged asset (prefer paid off properties if you have them in your portfolio), full docs required by lenders initially.
Another favorite method (advanced or for well heeled investors with capital) is a cash collateralize loan against a cash account in the bank. Almost every bank will do this loan with 20 min signature, NO credit checks, and the interest is incredibly low (normally a +3% margin from what they are paying on the deposited money, now 0.001% in most banks)
Advantages: No credit reporting, Not a taxable event, great on the balance sheet for your operations and net worth, access to preferred banking private banking rates for other products, useful as a score card for returns, built in emergency margin of 10% due to the 90% LTV banks use, etc.
Disadvantages: Large Liquidity needed, deposited funds at -2%+margin loss of value due to inflation (if at all), It's the absolute lowest form of leverage financing IF you happen to have $100k you can park for 18 months, why $100k and not $70k? The bank will use a 90% LTV. (economic losses are at the rate of inflation at 1-2% so just understand that)
Anyways, the reason to focus on the transaction costs to be a cash buyer:
-You are a cash buyer which will enjoy the highest leverage at the negotiating table for any deal.
-Prior to the purchase you can withdraw the maximum amount and deposit the money into an account 2 months before you expect to buy. (proof of funds with cash in hand) or if using my fav. a letter from any teller showing the current account balance of the collateral works as proof of funds.
- Transactions are cheapest for cash buyers, (no financing fees, etc), and fastest closings.
-You keep the returns as cash on cash investment which give you real returns, and simplifies the math.
-You don't have a $35k cash advance show up on your credit report, which would be a large account at 100% utilization, thus for 18 months, your credit score may be effected. (depends on the rest of your credit profile of course)
-Risk Adverse Partners: Like it or not, bank policy vogue is little or NO risk as possible, and you will pay for it in fees for the privilege of using their money.
Anyways, agree with other posters, if you are banking such FCF (Free cash flow or disposable income), you should really be in a position to cash up and play with your own cash but leverage it. Plus, I remind you to pay off any debts that don't make good tax-sense for leverage and debt and taxes. When you start to play this game, it's about tax protection all the time.
Just my 0.02 cents.
Charlie
