Making a Cash offer (Question about episode 221 with Tim Shiner)

[Account Closed]

Hey all, 

Just wanted to ask a quick question that I had while listening to to most recent BP episode!

The guest mentioned that when he makes an offer on a  property he is much more successful making a cash offer over those who are typically doing a 20% down 80% note from the bank. He said he is ready with a line of credit to move forward on a property if they are to accept. 

I'm interested in how a person would do this. Does that mean that the guest has a hard money lender willing to loan 100-200k? What are some other ways of obtaining a line of credit like this?

It seems that a cash offer and a short closing time would incentivize a seller to take a lower offer.

Thanks!

[David Faulkner]

By line of credit he likely means one of two things:

1. A business line of credit pre-approved up to a certain amount that he can tap instantly or
2. Most likely a home equity line of credit (HELOC) on either his primary residence and/or other rental property with significant equity (the kind you get from appreciation) pre-approved up to a certain loan-to-value. Again, these can be tapped instantly.

A bank can and usually does offer either or both of these products. HELOCS on rental property may be a bit harder to find but they do exist.

Yes, a hard money loan could serve a similar purpose. And yes, you are correct that a cash offer would incentivize a seller to take a lower offer. Alternatively, you can use cash to purchase distressed property in nice neighborhoods that would not otherwise qualify for traditional financing and/or the owner wants/needs to sell fast such that a 30+ day escrow to fund a traditional loan would not work ... in that case your only other competition would be from other cash offers, thus eliminating most of your competition from retail buyers. The result is the same, using your financial strength to your benefit to secure a better price.