Line Of Credit – Good or Bad?

2 Replies

Hello BP,

I have a question for you all, and a scenario that has been presented to me.

Is a line of credit (LOC) good for someone with great credit but no capital to invest? Obviously partnering is the best option, and I may do a combination of LOC + Partnership; but, I need to bring something more to the table than enthusiasm … especially since I work full time.

Here's the scenario. I've been contacted by someone on BP and offered a LOC. I haven't signed anything yet, but I've been pre-approved for $100k-$200k. The exact amount will be disclosed once the application has been submitted. The credit will be through a major lender; i.e. Citibank, US Bank, American Express, ect. Technically this firm is a middle man, classified as a credit agency. The company has a strong relationship with lenders. They take 8% off the top … so, if I get approved for $150k, I have access to $138k. I've been told that I can apply for my own line of credit with all these lenders, but that the amount I will be offered would be more like $10k, not $100k. I get 18 months at 0% interest, but will have to make the minimum payments. The company can work with me to convert the credit into cash with no fees from the lender … I've been told they have experience with this. Essentially, I can flip a house within 18 month, pay back the LOC and keep the profit. Once the LOC is paid back, I can do it all again with a new LOC and the 18 months starts over with the new LOC. If I do this enough times, I won't need the LOC because I will finally have my own cash to invest.

What do you all think? Is this something that is common? Have any of you ever used a LOC? Is this a typical LOC? What should I be asking this company?

Please let me know what you think … I would really appreciate it!!

@Whitney T Redfield

I've applied for a similar "LOC" as well, it was through Midwest Corp Credit a couple of years ago. I received a bunch of credit cards using my LLC. Cost me 8% about $5700.

Maybe the person who approached you has a different program, but it was not easy to access the line. Especially if you are planning to use it to acquire real estate. 

Since they're CC, you could use them for any companies that accept them. So if you have a big purchase through HD or a major retailer, you can use those CC easily. But to get and write checks from these banks was a challenge.

The only time I used one of these CC was to pay their fees. Other than that, I didn't use it. 

If the company offering the LOC can help me convert the credit into cash with no fees, then I'm going to do it and flip a house. Once I flip 2 or 3 houses, I will have enough capital to invest on my own without the LOC.

I keep thinking this over, and over, again ... and I really don't want to get paralyzed before I even begin.  I'm ready to start crunching numbers.  I'm ready to start making offers.  I'm tired of this life I'm living where I don't have assets, everything costs money that I don't have, and I rely on a paycheck.  I'm over it.  This is my future and it starts now.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here