Credit Line Use- Please Guide Me. - Posted by Chris Anderson

Posted by Ronald * Starr on July 03, 2001 at 22:35:07:

Chris Anderson------

Some lenders may only require 6 months before they would loan on the value, not the purchase price. If you can show a lot of fix-up money has been spent, you might even be able to get them do that in less than 6 months. This justifies the new appraisal being so much higher than the purchase price.

You can use your line of credit for anything you want. This certainly sounds legimate. The one negative is that you are tieing up a lot of money for a long time. If you are interested in rapid resale of bargain buys, you might make more with that credit money.

You either have an unsecured line of credit, so you don’t have to offer the real estate as collateral for it. Or else you have an equity line of credit secured by some property that you already own. Again, you do not use the newly-acquired property to secure the money.

Sorry, I can’t help you talk to the bankers. I don’t do much of that sort of thing.

Good InvestingRon Starr**********

Credit Line Use- Please Guide Me. - Posted by Chris Anderson

Posted by Chris Anderson on July 03, 2001 at 17:20:48:

Because of past relationships with a local bank, I believe I can get a credit line that I can use for single family RE deals. Also, I have seen many cases where (with cash) I can get properties at 80% of market or so. I am just not wild about the down payment requirements even though I have bought well below market. I would like to use a credit line to help in this area.

Please help me through the following:

  1. I would like to use my credit line to pay cash for the
    property. Intent is to leave on my credit line for 12
  2. I want to then Refinance using tradional 80% LTV NOO
    Loan WITHOUT having to put money down. Assuming that
    I bought correctly, then I believe that a new lender would
    use the appraised value of the property(correct?).
  3. Questions
  • Is this the proper use of the credit line?
  • How do I offer my bank security in the property while
    it is on the credit line?
  • I think my bank is new to this. They are comfortable
    with me but not this concept(yet). Any sweetners
    that I can do/say to help myself out? I plan to come
    Ed’s/Terry’s workshop next year but that is a long
    time away.

Thanks for any help.

Chris Anderson

Re: Credit Line Use- Please Guide Me. - Posted by Jay_TN

Posted by Jay_TN on July 04, 2001 at 09:08:46:

Hi, Chris, sounds like a good plan. I’ve personally used a home equity line to secure a home. We had intentions of renting it, but later sold the home. If your bank procures loans under Fannie Mae guidelines, they will want seasoning of 1 year before making loans based on appraised value. However, after only being on these forums a few weeks, I can see that smaller, local banks are going to be much more flexible. Your situation is perfect for starting rental properties. Buy a property with cash discount. Get a loan on the property at a later date. Take cash out and buy another property or two.

If you are bent on quick growth, and your environment supports this, you can take a cash out refinance on the first property, and use the money to leverage into other properties. For example, get a cash out refi on a property owned free and clear. In my area, rentals are around $80k. My loan amount would be roughly $60k. Take that $60k. Split it three ways and use it for down payments on three new rental properties. You have used none of your own money for down payments, and you have leveraged yourself into 4 properties. If you buy right, you’ll enjoy good cash flow, good potential for appreciation, not to mention the safety of more properties. In my case, since I already have experience in the field, so more properties is better.

To me, the no money down deals and lease options are not the best route. If you have the resources (i.e. money), then use it. Be smart. Think wisely. Be PATIENT. I’m 25 years old. Graduated with Engineering degree 1.5 years ago. I thought real estate would be easy. It’s not, but I’m glad. I now have the confidence and resources to succeed, and on my OWN terms.

Good luck,