Rental Property Investor · Markdale Ontario · Member since 2019 · 94 posts · 12 votes
Has anyone ever used a line of credit to cover a down payment to get into the investment with no money down? eventually refinancing the property and pay off the line of credit. Is this a good idea bad or a bad idea? Haven't given it much thought but I thought it might work, what are your thoughts?
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
7y
Absolutely but I must warn you to be careful of over leveraging which has been the downfall of many. Utilizing lines of credit, HELOC's, credit cards, supply house credit lines, etc all come into play for the creative investor as does private money. When used prudently, they can boost your investment career, if you make a mistake and you are over leveraged, it can drop you into a deep hole.
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
7y
Absolutely but I must warn you to be careful of over leveraging which has been the downfall of many. Utilizing lines of credit, HELOC's, credit cards, supply house credit lines, etc all come into play for the creative investor as does private money. When used prudently, they can boost your investment career, if you make a mistake and you are over leveraged, it can drop you into a deep hole.
Real Estate Agent/Investor · Peoria, AZ · Member since 2016 · 2k+ posts · 2k+ votes
7y
The funds you use for the down payment will most likely be sourced by your lender and the mortgage application itself will contain a section that will state that the funds you used for you down payment are not borrowed funds. Maybe a hard money lender won't mind, but traditional lenders may not allow you to borrow funds from one source and use that as the down payment towards borrowing funds from them.
Rental Property Investor · Maria Stein, OH · Member since 2018 · 75 posts · 48 votes
7y
Yes, agree on not over leveraging though.
Could do no money down, then force appreciation with rehab, rent and then refinance to pay back heloc. Could also flip the property instead of renting it out. Just have to get a great deal and if you plan to refinance make sure your comps are good. I refinanced and had an old house converted to 5 units with very few comps, fortunately after rehab the appraisal came back at a decent number. If I could do it over again I would find sold properties to get an idea of market price and then find a similar outdated/distressed property to purchase.