How I turned $10k into a $50k Line of Credit
- 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!