Posted by Ed Garcia on April 08, 2001 at 22:20:40:
Hi Alan,
The first thing I want to address in your post is the cost of refinancing off of the line.
Alan, thank about what you’ve just said. The credit line, if structured and used properly, will allow you to do 100% financing on an None Owner Occupied property, and you shouldn’t have to pay points for closing cost the first time around. If you shouldn’t sell the property, and would decide to keep it as a rental, then you would have to pay closing cost to re-finance it, what’s so bad about that? You still ended up purchasing a None Owner Occupied Property at 100% financing, not to shabby if you ask me.
Credit lines, are not permanent or take out financing. Credit lines are designed to help you accumulate the property, for re-sale, or if you choose, to hold at a later date, it will assist you in purchasing the property with out any money down. There are of course many advantages to a working credit line, to which I’ve just named a few.
Alan, you mention that I stated that banks don’t look kindly on keeping properties on you credit line for extended periods of time. Yes Alan, that’s correct, you see a Working credit line is designed for short-term loans not long term, and the bank wants to turn the line keeping the money working for both you and them.
As far as my personal time is concerned, don’t worry; I have this tall beautiful blond that won’t allow me to neglect her or my teenage daughters. She reels me in when I get carried away. I will admit that the time I spend on the net and with others has become a contagious addiction, and I’m not sure if I’m ever going to recover.
It was good to hear you speak again at this year’s convention. Although, you covered some of the same material as last year, I got more out of your talk this year. That’s because since the 2000 convention, I have done a few deals and was able to understand more of your explanations and see their practical application to my business. (Hint to second-time conventioneers: Don’t skip a presentation because you saw it last year. You might actually learn something new since you’ll be approaching the seminar from a different perspective than the year before.) I’m still a part-timer but that will change by the end of this year.
In any case, I am in total agreement that having a line of credit and being able to make cash offers would greatly increase my volume of deals. I am confident that I can get a line of credit so I’m working on my business plan and will send it to you for your comments when it’s ready. Unfortunately, running my other (non-RE) business won’t allow me to attend your June workshop, but I’ll be at the next one whenever or wherever it’s scheduled.
I am primarily interested in buying property, updating it as necessary and then reselling on a lease/option. During your talk you explained that the bank didn’t look kindly on keeping properties on your credit line for extended periods of time. To me that means the property will have to be refinanced once I have a tenant/buyer in place. However, it seems to me that this would involve two closings and here in Maryland the closing costs are among the highest in the country. I know that those costs can be rolled into the refi but that still cuts into the profits. Also, wouldn’t seasoning be an issue if the property has been held less than 12 months?
I look forward to answers from you, Ed, or anyone else that might be using a line of credit to do lease/options or contract for deed where you’re holding title for more than a year or two.
After seeing you all over the hotel in Atlanta and the time you take to answer posts here on the board, I wonder how you manage to run your own business and have a family life as well. You certainly have my respect.