Hi BP!

I was wondering if you were to BRRRR using a PLOC to buy & rehab, would that affect your DTI, therefore affecting your cashout refinance?

Also, does anyone know the current PLOC interest rate? How much do they lend?

Thank you.

Aloha,

 What market are you looking to invest in? Assume it’s not Hawaii with this strategy as I don’t think you’ll find PLOCs with very high limits or low enough interest rates to make this a feasible source of financing.  It’s easy to check rate sheets on various bank and credit union websites though to see if anything meets your needs. 

It would not really affect your DTI though because you would be financing out of the PLOC in the refi stage (if all goes according to plan) so that loan would no longer be a part of the calculation.

@Jason Leavitt you’re right! I’m investing in Kansas City MO. Anywhere from 30-100k was what I was thinking. I thought it would be another form of an OPM (bank/credit union) but wasn’t sure how it’d affect my debt since it’s money borrowed from a bank.

Thank you so much!

Hey Young! Nice meeting you at the meetup today. Just looking through your posts, and thought I would answer here so it helps others too. I've actually gone to the different local banks in Hawaii and opened up a bunch of PLOCs for this purpose (over 100k total lol). 

If you don't have any balance out, it doesn't count against your DTI. (At least it didn't for my lender) But whatever balance you DO have out will count against your DTI, and I think it will actually drop your credit score a little since that affects your percent of Debt used. (Also new hard inquiries and new credit doesn't help either) As far as how it affects your DTI specifically, each bank calculates the minimum payment due differently, so you will have to go bank to bank to see how they calculate the minimum payment on your balance. For instance, First Hawaiian Bank calculates the minimum payment to be 2% of the outstanding principal plus whatever interest was accrued during that month. Let's say you had 20k borrowed for the entire month, and your interest rate was 5%. The minimum payment due would be 400 (the 2% of principal) + 83.33 (The 5% interest for that month). So the debt calculated in your DTI would be 483.33. Other banks will just do a straight 3.25% of principle etc. I've got a list of a bunch of bank's interest rates, products, and general info that I can give you on the side. Or if anyone else wants this info, just PM me.

@Young Park Good to see you on here! I have PLOC's at $15K with ASB and $20K with Hawaii State FCU. These are both higher interest, but good for short term purposes. For the gap funding, I like HELOC rates more, because of the intro rates. Best of luck!

The Reialoha website has the Heloc cheatsheet with lowest teaser rates in Hawaii.

Originally posted by @Daniel Kong :

Hey Young! Nice meeting you at the meetup today. Just looking through your posts, and thought I would answer here so it helps others too. I've actually gone to the different local banks in Hawaii and opened up a bunch of PLOCs for this purpose (over 100k total lol). 

If you don't have any balance out, it doesn't count against your DTI. (At least it didn't for my lender) But whatever balance you DO have out will count against your DTI, and I think it will actually drop your credit score a little since that affects your percent of Debt used. (Also new hard inquiries and new credit doesn't help either) As far as how it affects your DTI specifically, each bank calculates the minimum payment due differently, so you will have to go bank to bank to see how they calculate the minimum payment on your balance. For instance, First Hawaiian Bank calculates the minimum payment to be 2% of the outstanding principal plus whatever interest was accrued during that month. Let's say you had 20k borrowed for the entire month, and your interest rate was 5%. The minimum payment due would be 400 (the 2% of principal) + 83.33 (The 5% interest for that month). So the debt calculated in your DTI would be 483.33. Other banks will just do a straight 3.25% of principle etc. I've got a list of a bunch of bank's interest rates, products, and general info that I can give you on the side. Or if anyone else wants this info, just PM me.

 Hey Daniel! It was great meeting you at the meetup!

Thank you for the info. Would that 2% of principal subtract from your balance? For example, $400 (+83.33) the first month (remaining balance 19,600), then next month would be $392 (+83.33)(remaining balance 19,208), so on and so forth?

Yeah, I would love to get that info from you. See you on Wednesday! 

@Duc Ong @Lane Kawaoka

Hey Duc & Lane! Nice to see you here!

I wish I could use HELOC, but unfortunately, I don't have a home to pull off of...

I have an investment property under rehab in KCMO but will be cash refinanced to pay off my investors. 

I'll still check out the cheatsheet. Thanks, Lane!

@Young Park Correct. The 2% would subtract from your principle. And you can also just take it out again right after you pay it back lol. 

Whatup @Lane Kawaoka and @Duc Ong  lol. 

This is why I don't like the BRRR.

It works till a bank does the switch and bait or some contractor runs off with your money.