All Forum Posts by: Chris Teti

hi MIchael, each lender is different. Traditional mortgage companies tend to be the strictest with stuff like that. The problem with a HELOC is that is reports to your personal credit profile, so everyone can see it and how much you are using it. I prefer a business line of credit that is not tied to any particular asset and doesn't show up on your personal credit report. My HELOC is used as a backup plan in case I need some additional funds once I have the property.

@Susan Tan You could also get lines of credit in place for yourself so you don't need the partners $$. 

If it reports a balance to the bureaus (check your reporting date, it may be different than your payment date), then it will negatively impact your DTI. It'll be based on your minimum monthly payment. So it may be minimal or it may be alot, depends on how high your balance goes.

@Joshua Mercado I agree with @Bridgette Delva. Once you have shown your taxable income you shouldn't have a problem. But, all lenders are different, so don't be afraid to get on the phone and call around. The interest rates might be higher, but if you have the bank statements to show your income, there may be some lenders that are willing to work with you. If not, HML or private lenders might be the best option in the short term.

@David M. That's true if that's the way you need to use it, then you are right. But I work with tons of real estate investors that use credit cards and rarely do they have the ability to pay it off every month, especially during a project. They typically have to carry the costs for a few months to complete renovations to either sell or refinance out. 

Biggest issue is if as you use your personal credit cards, your score and DTI will be negatively effected.

You can use private money or lines of credit. Depending on your lender they may require them to be seasoned in your bank account for a period of time. I do recommend you have an exist strategy for the gap funding though. The sooner the better but <24 or ideally <12 months is preferred. 

@Robert Saunders I agree with Joe. It doesn't mean $0 down, it means that you use other funds to pay for your gap funding so you do have to use your own cash. Unless you develop a long relationship with a lender over many projects, usually a HML or private lender, they won't fund 100% of your project.

In my opinion you definitely want to build your access to credit cards, but you have to do it the right way. Credit cards (aka revolving credit) not only help you build your score, but can be a great tool if you are going to own a business or get involved in real estate investing. You have to be careful to make sure you don't run your balances up too high or that will negatively impact your score and DTI.

Hi Beth, I haven't worked with them directly, but some of my clients have. I don't have anything positive or negative to say about them. Just be clear on how it works. It's not a line of credit that you can go do whatever you want with. You will have to go to them to approve each deal you want to make. So it's more like a pre-approval than a true line of credit.