Posted by pete on August 14, 2003 at 10:52:55:
Ed,
Thanks for the information. I talked to a mortgage rep. at my local credit union and she told me that they do not do construction loans(rehab-investor loans) and that I should try a local bank for those. it’s doubtful that I will get a working line of credit at this juncture in my real estate career, so i may opt to use hard money in the meantime.
Thanks,
Pete
WLC? Good credit(750) - Posted by pete
Posted by pete on August 13, 2003 at 22:39:41:
I never thought of getting a Working Line of Credit(WLC) until I stumbled onto this page. I always assumed that one had to obtain a hard money loan to get into real estate investing. Would it be hard for me to obtain a WLC at a local credit union with a credit score of 750 and good income? Also from searching the database, I see that I must submit a business plan. I know I can qualify for signature loan up to $20,000 at my local credit union, but this isn’t the same as a WLC right? I’d like to get a WLC so I can do closings faster. Do conventional loans take a long time to close and can they be used for rehabs/flips? Hope you can help me.
Thanks,
Pete
Re: WLC? Good credit(750) - Posted by TC
Posted by TC on August 14, 2003 at 12:20:59:
With a credit score that high, you can get a 115% cltv combo on investment property…up the sales price a little to allow the seller to pay closing costs out of sale proceeds…and you have cash left over to rehab…just have to know if its enough.
Re: WLC? Good credit(750) - Posted by Ed Garcia
Posted by Ed Garcia on August 14, 2003 at 10:08:54:
Various credit lines
Pete,
There are various types of credit lines. There is a Personal Credit Line aka Signature loan or line secured strictly by your signature and personal guarantee. This line is small in size but can be used for down payment or fix-up money. There is an Equity Line of credit aka HELOC (Home Equity Line Of Credit), and then there is a WLOC (Working Line Of Credit) big difference between an equity line, and a working line of credit.
An EQUITY LINE OF CREDIT is collateralized by a house or specific piece of real-estate. It?s size is RESTRICTED to the amount of equity you have in the house pledged for collateral. You can do what ever you want with the funds, NO RESTRICTIONS.
It?s primary advantage for an investor is to use it for down payment or fix-up money.
A WORKING LINE OF CREDIT, is a commercial LOC (line of credit) given usually
by a bank. This line is devised as working capital for a business.
A Working Line Of Credit is AWSOME…
(1) You can make CASH offers, allowing you more profit in your deal.
(2) You can CLOSE faster, making that extra deal, and more profit.
(3) You can SEASON your properties, by leaving them on your line for a while.
(4) You can use it to do FLIPS, where conventional financing is too expensive.
(5) It’s CHEAPER money, meaning you pay 1 or 2 over prime and no points
per transaction.
(6) You can make offers with more confidence, which is projected to the seller,
or Real-estate agent.
(7) There is NO LIMIT, as to how many deals you can do.
(8) It?s easier on your credit score because you can do multiple deals with out affecting your credit score.
For example:
If I own a furniture store, and I need inventory. A bank may lend me money to purchase furniture from the manufacture. I now stock the furniture for re-sale at a profit.
In our case, we purchase real-estate at below market or wholesale. We convince the bank, that our business runs just like the furniture store, and they provide us a working line of credit to purchase our inventory, which consists of real-estate.
In both cases the line is secured by the inventory. The bank will usually determine how much they think your line should be, based on past performance or track record. As you grow and do more business, your working line of credit can be increased.
A new investor would not be ready for a working line of credit. An experienced investor with a track record, could get a working line of credit, which would allow them from the sellers stand point, to pay cash. In making cash offers you can usually cut better deals.
Sorry to say Pete, but it?s not unusual for people to get confused when working with banks and going in and requesting a curtain line of credit, just to have the bank offer or give you what they have available, and try to get the borrower to accept it in lieu of their
original request.
I hope that this post has given you a little better understanding of some of the credit lines we as Real-estate investors would use.
Ed Garcia
Re: WLC? Good credit(750) Good Stuff Ed - Posted by Patrick
Posted by Patrick on August 14, 2003 at 18:27:19:
This is a good thread. In reponse to Ed’s reply, what would be the best way to get more information? Particulary, bullets 1-3. Gotta book? I’d be happy to trade more information for some useless stock.