How are people getting these big lines of credit?

Question

I have investor clients tell me about their giant lines of credit available for cash purchases... in your experience, are these relationships with local banks? private money?

Jay Hinrichs · Answer

i dont know..  Lima one will give you a commitment for 5 mil if your experienced but its not a line of credit per se .  It will be based on the property and the borrowers continuing success.. I was offered one from them and I think they wanted 10k or 20k up front for it.

For a true unsecured LOC that you can draw on anytime to get 5 il you will need very large net worth etc in  the range of 10 to 1 and relationships..  Commerical banks provide these to their close clients but they are very hard to get and keep also keep in mind those types of LOC's have to be retired annually for 30 days thats how mine work.

Russell Brazil · Answer

I have 3 lines of credit. Business line of credit, HELOC, and a line of credit against my stock portfolio.

Nicole Davidson · Answer

thank you! I have flipper friends with $5,000,000 credit so I bet its based on experience. I want to buy and rehab or fix and flip depending on deal.

Andrew Postell · Answer

@Nicole Davidson there's ALL types of things out there that the average person cannot get access to.  Some Lines of Credit are based on assets, some are based on experience, some are relationship based, etc.  Usually, someone just starting out cannot get a GIANT line of credit..."Giant" being a relative term though.  What's "giant" to you might not be "giant" to me.  But some large companies have lines of credit in the $100million range.  It's all relative I guess.  So, if you are just starting out, the plan here is to figure out where you want to go in your real estate career and then someone out there can put you in the right place for financing.

Hope all of that makes sense.

Jason Wray · Answer

Nicole,

If it’s a primary home the buyer can take out up to 95% CLTV and some banks do not have a Max credit line.  Some have a cut off of $500K to $1MM so the equity can be taken out through a cash out refinance or a HELOC.  Investment properties are usually capped at 65%-70% CLTV depending on the number of units/property type.

You also have DSCR which offers cash out up to $1.5Million without using any personal income or tax returns as long as the property debt services itself usually 1.10-1.25%DSCR on Jumbo Cash out.  Cash out is getting easier to obtain since mortgage applications are down new programs and LTV's are popping up each week.

Biggest market right now is investment purchase and cash out refinance so the banks are catering to the customers.  They are also trying to capture the next purchase when offering the cash out.

How are people getting these big lines of credit?

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