@Nicole B. - First of all sorry I never responded to your message. I am not a frequent BPer and I logged in today after a while. My apologies. I have been trying to be more
I am not quite sure if I understand this part
"I was told that LOCs begin at $1MM and around 15-18% liquidity is needed for the line amount you want. So if I put up $150k or $175k or more, I was expecting a large LOC to outright purchase properties cash"
Basically when you apply for a LOC Corevest is going to look at your past experience with real estate deals (whether its rentals or fix n flips or whatever else) but for them to approve LOC they require one to have around 20% (they can probably do with 15-18% like you mentioned) of the LOC amount in liquidity (cash on hand, stock/ira/401(k) etc.). In your case if it's an LOC of a million you will need to show liquidity of ~ 200k or at least between 150k-180k.
I think a lot of people who are new to this (I was too when it came to borrowing hard/private money) think of LOC from a private lender (such as Corevest or FOA or others) as he/she having access to this large line that they can use properties outright (like a credit card or a HELOC)
That's not how these LOCs work. Yes you do get approved for a large line say 0.5 a million or more which can help you work on multiple deals at the same time but having said that when you find a deal that you want to acquire you still have to send a request for an 'advance' for them to issue those funds (off the LOC) to you.
For acquisition - depending on the #s for the property you'll be putting 20%-30% down payment with 70-80% from the LOC. 70%-80% borrowed funds is what you make IO payments on to Corevest
"I was told that I could do this but I had to have a minimum of 2 properties for this LOC" - I am not sure what you meant by this. I don't know if the above paragraph answered this already or not. If not please let me know and I will try to answer your question
As for the update regarding my own journey - As of today (since I closed on the LOC in Nov) I have acquired the following on my LOC
1) SFR - BRRR
2) A package of 3 townhomes - Not a BRRR really per se but I think I got a decent deal and I had other rental properties in the same area so it was a good addition to my portfolio. I bought the portfolio at 84% LTV so at 75% cash-out I'll be in the deal with around 9% down. Yes I will have a little higher int rate on a refi as I won't be doing FNMA financing for refi but in spite of that it still should help me quite a bit with my cash-on-cash return
3) A quad - I just closed on it last week. I wasn't really looking for MF as I have mainly been investing in C+/B and higher class singles. It was a property that was neglected and basically needed a full rehab. It won't be a BRRR but I came across the deal and I liked it because of it being in an A class neighborhood, separately metered including water and just overall area where the property is and demographics and the tenant pool that I will be attracting. Based on my pro-forma I will be in the deal with about 10-15% down at 75% cashout-refi. Considering all the factors I decided to go for it.
1) and 2) together above are currently being processed as a portfolio cash-out that I am looking into to get them off the LOC. I am looking at 30 yr amort 10/1 ARM for this
As for 3) when the rehab is ready I will be using my last 10th FNMA financing spot for it. I was kind of having that reserved for something special and I think 3) sort of met that criteria.
A couple of important points that I would like to mention for some of the new investors
1) Any LOCs from private lenders that are being offered are not really the same as cash from a CC balance transfer check or a HELOC or some other line that gives you access to cash on the spot. It does provide you some benefits which is the credit check and underwriting is done only once at the beginning and once the LOC is approved and closed on you won't have to send any documentation/paperwork etc. per deal. Yes the lender still do their DD and run an appraisal/BPO but the documentation per deal is only purchase agreement, rehab bid (if you're borrowing funds for rehab) and EOI.
You can definitely speed up your RE holding with an LOC
2) If you're close to 10/20 (if you're married and planning to use those) FNMA financing spots being used I will not recommend properties that are valued below 90-100k ARV. I have been talking to a ton of brokers and lenders and there are very few private lenders (if any) that will be ready to take on your refi if the loan amount is < 75k. Even with lenders who do blanket loans with a handful of properties and even if the total portfolio value is over 75k many of them require each property to have a loan amount of 75-100k
I will let you all know how my refinancing with 1) and 2) goes in the next 3-4 weeks. The rehab and cash-out refi on quad is a non issue for me as it'll be a FNMA refi plus the ARV would be around 250k on the quad so any lender would be ready to do the refi on that once the property is stabilized
Hope this post helps people who are in the same boat as I was 4-5 months ago or are looking into LOC/funding options for your RE investment journey
