All Forum Posts by: Eric Smith

 Honestly, I'm not sure. I'm a buy and hold investor so everything I buy, I'm trying to put a tenant in. It probably depends on the bank you work with.

No, I don't have to show proof of tenants in the houses that secure my LOC but my banker has the trust in me to run an efficient business. If I have a rent a house, I will have a tenant and quickly fill any vacancies.

 Yes, I use commercial loans.

 Haha sorry, no pics. It is a silver 2008 Ram 1500 that had 11k miles at the time.

Yes, when you have a LOC the bank will transfer the amount you request into your business account. That takes about 5 minutes then you can pay the buyer with a cashier's check. You're paying with cash essentially in the eyes of the owner.

 Hi Justin,

Yes, you can use the LOC to buy and fix up distressed properties. Also, you probably won't get a LOC without being able to qualify for a loan. That is discussion for you and your banker. I put all my houses under an LLC so I don't have a limit.

 Hi Garrett,

In order to avoid putting 15-20% down I have to buy the property at a discount. If I was to go to my bank to purchase the house on a note without the LOC the bank would use the purchase price as the value of the house. When I purchase the property using the LOC (cash) the bank can then use comps from the neighborhood to appraise the value of the house which will be higher then what I bought the house for when I refinance.

 Hi Jeffrey,

I use a local lender that I have built a relationship with over the past year.

 Hi Sergio,

I only buy for cash flow but I do hope for appreciation. The point of using the line of credit is to put down no or very little money out of my pocket. I buy houses between  $30-50k, so if I pay 15% down on a $40k house I will have to come up with $6k. The money down will knock my mortgage payment down $47 per month. It will take 10.5 years to get my down payment back from the $47 per month. As long as I can cash flow after all my expenses (operating and capital) then my return will be infinite.

Once I use the LOC to purchase the property, I tell my banker how much I will need to put the house on a note. As long as I can be under 85% of the the appraised value of the house, I can finance the the whole amount with the note paying back my LOC...it takes about 2 weeks to get the house put on a note so I can use my LOC to purchase another property.

• Almost 2 years ago, I was a finance director at a Dodge dealership in my home town. I had been building my rental business but soon learned that having to come up with 15-20% down on each house prevented me from buying at the rate I wanted. So, I asked my banker for a line of credit so that I could buy a house then refinance without having to put money down. The only problem was that I only had one house at the time and my equity in the house was not enough to secure a line of credit.
• A few weeks after I talked to my banker, a previous customer of mine came to the dealership with the awful news that her husband died. She asked if I knew anyone that would buy his truck. She expressed that she needed $10k for it even though the truck was worth $20k. 
• I used money I had been saving for my next rental to buy the truck. I then refinanced the truck at 1.9% for $20k. So, I got my initial $10k back and had another $10k for investing.
• My next step was buying the Birmingham house using the $10k I received from the financing of the truck. I was excited because I didn't have to put any money out of my pocket to buy this rental! I hired a property manager to rent the house and I expected to just sit back and collect rent...the only problem was that the house was having problems getting rented.
• I decided to go by the house to see what was going on. It was a nice house in a great rental neighborhood. When I walked in, the house looked nice until I walked into the master bedroom to find a toilet seat in the middle. The master bathroom was missing the toilet (the property manager was supposed to have this taken care of). I was appalled that the property manager did not do what he was paid to do AND that he was showing the house to prospective tenants with a toilet in the middle of a bedroom! He was immediately fired and I was discouraged because I was losing money while the house wasn't rented.
• Luckily, everyone I know and meet gets to hear about my real estate goals. Someone that I worked with was looking to move out of his son's house and asked if I had anything available. I showed him the Birmingham house and he loved it! I eventually sold him the house making an $8k profit.
• Now, I had my initial $10k back in savings and $18k to use for investing. With the $18k, I bought two rental units at great prices and cash flow. The best thing is that the two rentals I bought had enough equity for my banker to give my company a $50k line of credit!
• With this line of credit I've bought 3 more rentals putting very little money down. I will be able to build my rental business much more quickly then if I had to put 15-20% down on each house.
• I hope everyone that reads this post will be able to use the financing techniques I used to help grow their business using $10k to get a $50k line of credit!