Unsecured Lines of Credit

I am curious if anyone has looked into receiving an unsecured line of credit and what their experience has been with it. I have a company I have been speaking with that guarantees $150k+ in lines of credit if I have my two old business partners, and I sign off on it. They said I would be able to liquidate 80% of the credit lines. I'm looking to obtain more money to purchase a few more cash-flow properties. My biggest concern about purchasing cash-flow properties with the line of credit is that the interest rate is variable. I don't want to put myself in a position where I'm negatively cash-flowing on these due to the APR increasing.

I will be heading back to school to finish up my last year and won't be able to qualify for any type of traditional funding.

Ideally, I'd like to leverage with a HML that is willing to lend 65%-70% LTV on the properties after I purchase, rehab, and have renters in place.

Any advice is appreciated!

Bryan Hancock

Real Estate Investor · Austin, Texas

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Dec 06 '10, 08:29 PM

A lot of these companies run scams on folks seeking funds. Make sure you don't pay them a fee for anything except for successful PLACEMENT of funds and the money does not change hands until funding, closing, etc.

Lines of credit are good for short-term financing and are subject to the interest rate risk you mention. The rates are generally much lower than hard money rates though.

What company is it that you are working with to get funds?

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Paul B.

Real Estate Investor · Alpharetta, Georgia

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Dec 06 '10, 09:38 PM

Originally posted by John Delia

Hey guys,

I am curious if anyone has looked into receiving an unsecured line of credit and what their experience has been with it. I have a company I have been speaking with that guarantees $150k+ in lines of credit if I have my two old business partners, and I sign off on it. They said I would be able to liquidate 80% of the credit lines. I'm looking to obtain more money to purchase a few more cash-flow properties. My biggest concern about purchasing cash-flow properties with the line of credit is that the interest rate is variable. I don't want to put myself in a position where I'm negatively cash-flowing on these due to the APR increasing.

I will be heading back to school to finish up my last year and won't be able to qualify for any type of traditional funding.

Ideally, I'd like to leverage with a HML that is willing to lend 65%-70% LTV on the properties after I purchase, rehab, and have renters in place.

If your triumvirate has a strong liquid net worth, it's conceivable that you could get a line of credit, but they could possibly get it from the bank on the corner. What is the name of the company you're talking about? There are so many "credit line" scams out there, it's disgusting.

What do you mean by "liquidate" 80% of the line?

HMLs are not for refinances or long-term money.

Darryl Dahlen

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Dec 06 '10, 11:37 PM

I would be very cautious. ULOCs have become very hard to secure simply due to their very nature. The few banks that still offer this sort of finaning require outstanding credit, and even then, the offered lines are generally fairly small (50K or less). This of course is for new lines, not for established clients who may be able to secure larger lines.

If you are dealing with a non-traditional lender then your risk of failure goes up exponentially. There are a some real lenders who offer ULOCs so it isn't to say that every lender is bogus. Still, even the NT lenders don't often offer large lines. I think the most I've seen offered is 150K, but I highly doubt most qualify for anything near that amount to start.

As mentioned, there are a lot of scams out there, so if there are any upfront fees involved you better be prepared for the worst. Just do your DD on the lender to make sure they are real.

Bryan Hancock

Real Estate Investor · Austin, Texas

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Dec 07 '10, 12:53 AM

One good thing to ask these folks is for REAL references of recent lines/deals they have closed. My experience is that you will get some huffing and puffing about "privacy" issues for non-players and the real folks will be happy to volunteer references. That is a quick screening mechanism whenever someone approaches me with these types of products.

Jon Holdman

Real Estate Investor · Wheat Ridge, Colorado

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Dec 07 '10, 01:10 AM

There was a discussion here recently about some credit scheme that was quite complex and, to me, sounded like a complete scam. This statement: "They said I would be able to liquidate 80% of the credit lines." sounds like something along those lines.

If you have a line of credit, you should be able to take the full amount. If the company that's helping you set this up is somehow involved in getting any money, like that last 20%, I'd be very, very leery.

If they're charging up front fees, be leery.

Explain what they're proposing in detail.

Jon Holdman, Flying Phoenix LLC

John Roth

Real Estate Investor · Indianapolis, IN

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Jan 19 '11, 06:14 PM

Up front fees-run. I may be wrong but, it is my understanding that you still need very good personal credit. Also, it is my understanding that most of these lines are in the form of credit cards. I really don't know much about them but, I have been approached from others and it just all seems like a big time scam.

Darryl Dahlen

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Jan 19 '11, 08:30 PM

There was another thread about ULOCS here a little bit ago.

I know Wachovia offers them and someone else said Chase does too.

I would not expect a line anywhere near 150k though.

Bryan Hancock

Real Estate Investor · Austin, Texas

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Jan 19 '11, 09:37 PM

Once lines exceed $50k the qualification criteria goes way up. Wachovia is still doing small lines. I think Jon Klaus mentioned that Chase is doing $50k lines right now.

You may also check with your small regional bank if they are solvent right now and your balance sheet is strong.