Hello to Everyone, I am a single female mother looking to retire in the next few years from my rental income. I currently own two single family homes free and clear and collect $1,300 monthly from the two. I have just recently Incorporated my rentals into a LLC and have one business credit card with capital one with a credit line of $2,000. I am looking for information on how to establish a high line of Business Credit as well as a how to go about getting a loan to purchase other properties. My goal for 2015 is to purchase three more properties. I live in a area where I could buy a rental single family house for around $25-35 thousand and collect roughly $650 for 2bed and $700 for 3bed. My state is Iowa. Thanks in advance
The two properties you have free and clear can be used as collateral to get a loan against them. Banks will typically give you 50% of what they are worth.
@Lea Morgan Hi Lea, well it sounds to me like you are in a pretty good position to do what you want to do or even pass your goals you set if you so desire.
If you can buy 2 bed homes for less money than a 3 bed and get the same amount of rent out them basically then I would say look for the 2 beds. You should be able to go to the bank or find a bank that you can do cash out refi with on your 2 current properties. If you have 2 properties free and clear x ave value 42K = 84K worth of assets. 84K x 80%=67K you will have cash in hand.
You can use this 67K to either purchase outright the other homes you want to buy or split it up and use part of it as your 20% down on as many properties as you feel like purchasing. If you could buy 2 bed 35K homes then you would need 7K down to purchase. 67K divided by 7K= 9 more properties you could get into if there were no repair costs involved. That would be a perfect world, but there are costs and likely a few if not some repairs that can be done/need to be done on almost any home. But at least you can see that you do have purchasing power should you decide to use it.
As far as raising the limit on your card, if you have been using it I hope you have paid the balance every month. If not then do so. Start paying off the balance in full early or just on time and periodically call and ask for a higher credit limit. Often times they will lift the limits, especially if you aren't asking for huge increases and tell them you are using it regularly in business and need a little extra room for purchases in a growing business.
Thanks Jeff McCaskey that was great advice
Originally posted by @Arlan Potter:
I think you are correct if you take a loan on each of the properties. I think 50% applies if you want a line of credit. I could be wrong. She should definitely talk to the banks in her area to see what they are willing to do.
Hey Lea. What area of Iowa are you from? Are you wanting to buy in that local area?
I agree with a lot of what the others have said. I would definitely refi your properties and take out what you can.
My model has been to refinance the property that I have, use that to buy another property with cash, which is a good tool to get a better deal, also use that refi money to do the renovation, which I buy pretty distressed property most of the time. Then once I have it stabilized and rented, then I go back to my banker, redo that one and move on to the next one.
I have worked exclusively with a single mortgage guy, that may not be the best choice for everyone, but Ive grown a good relationship with him and we know what each other needs. I do this full time, so I don't have the advantage of having another income. Which means that we refi at 70% LTV, and I'd say the appraisals come back conservative, but I get pretty good terms and I can pull out enough to do the next project.
Good luck, and if there's anything else that i can do to help, let me know!!
Midwest Herritage bank (the one hyvee owns) has a lender that does a lot of investment property loans. Shoot me a message and I will get you his contact information. I am in the Des Moines Area. :)
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