General Real Estate Investing

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Nathan Frost
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  • Wichita Falls, TX
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Business Line of Credit

Nathan Frost
  • Rental Property Investor
  • Wichita Falls, TX
Posted Sep 22 2022, 05:44

Hi all, how can one use a line of credit to add rental properties to their portfolio?  Can someone give me an example?  Bank said I could use it as the down payment and then get another bank to fund the loan.  I am trying to add more rental properties and wanted to see how to use this.  A lot of banks here are not doing HELOCs.  So I am looking at line of credit or possible cash out refinance but really don't want to cash out refinance on my primary.

Lubbock, Texas

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Kerry Noble Jr
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Kerry Noble Jr
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Replied Sep 22 2022, 06:13

depending on the amount of the line of credit and the purchase price, you could purchase in cash to get a better deal......then Refi into long term financing....

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Jay Hurst
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Jay Hurst
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Replied Sep 22 2022, 06:16

@Nathan Frost   Do you have substantial equity in your current investment properties?  if so, you can potentially use that equity as collateral to buy new properties. We offer that product for example. 

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Nathan Frost
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Nathan Frost
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Replied Sep 22 2022, 06:40
Quote from @Jay Hurst:

@Nathan Frost   Do you have substantial equity in your current investment properties?  if so, you can potentially use that equity as collateral to buy new properties. We offer that product for example. 


Yes, I am currently trying to add one property using that method.

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Jay Hinrichs#2 General Real Estate Investing Contributor
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Jay Hinrichs#2 General Real Estate Investing Contributor
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Replied Sep 22 2022, 06:44

keep in mind most business lines of credit from a bank TRUE unsecured LOC's are on one year revolvers and they can and are frequently called.. another tid bit is many times they have a 30 day resting period per year.. meaning you have to pay it off and rest it for 30 consecutive days.

these are true unsecured LOC's from Banks..

also careful with the fake business loan lenders that say your all approved just send me a little money up front.. in almost all instances they are simply scammers crooks and thieves. 

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Nathan Frost
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Nathan Frost
  • Rental Property Investor
  • Wichita Falls, TX
Replied Sep 22 2022, 07:10
Quote from @Jay Hinrichs:

keep in mind most business lines of credit from a bank TRUE unsecured LOC's are on one year revolvers and they can and are frequently called.. another tid bit is many times they have a 30 day resting period per year.. meaning you have to pay it off and rest it for 30 consecutive days.

these are true unsecured LOC's from Banks..

also careful with the fake business loan lenders that say your all approved just send me a little money up front.. in almost all instances they are simply scammers crooks and thieves. 


So what do you recommend? Refinance it or pay it off in a year. One year could be tough to pay off a $10k LOC. What is an example of how to effectively use the LOC? Wish I could use a HELOC but a lot of banks around here are not offering them.

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Jay Hinrichs#2 General Real Estate Investing Contributor
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Jay Hinrichs#2 General Real Estate Investing Contributor
  • Real Estate Broker
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Replied Sep 22 2022, 07:18
Quote from @Nathan Frost:
Quote from @Jay Hinrichs:

keep in mind most business lines of credit from a bank TRUE unsecured LOC's are on one year revolvers and they can and are frequently called.. another tid bit is many times they have a 30 day resting period per year.. meaning you have to pay it off and rest it for 30 consecutive days.

these are true unsecured LOC's from Banks..

also careful with the fake business loan lenders that say your all approved just send me a little money up front.. in almost all instances they are simply scammers crooks and thieves. 


So what do you recommend? Refinance it or pay it off in a year. One year could be tough to pay off a $10k LOC. What is an example of how to effectively use the LOC? Wish I could use a HELOC but a lot of banks around here are not offering them.


for me I use the funds for rehab and quick turns never to buy long term assets as 100% financing can put you underwater quickly .. those lines of credits are not intended for downpayment and long term holds.. they are to help you with cash flow in your transactional business thats what they are designed for. And frankly very tough to get U need to have a lot of liquidity have a lot of money in their bank good track record etc etc.. again I am talking about a true bank unsecured LOC.

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Nathan Frost
  • Rental Property Investor
  • Wichita Falls, TX
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Nathan Frost
  • Rental Property Investor
  • Wichita Falls, TX
Replied Sep 22 2022, 07:24
Quote from @Jay Hinrichs:
Quote from @Nathan Frost:
Quote from @Jay Hinrichs:

keep in mind most business lines of credit from a bank TRUE unsecured LOC's are on one year revolvers and they can and are frequently called.. another tid bit is many times they have a 30 day resting period per year.. meaning you have to pay it off and rest it for 30 consecutive days.

these are true unsecured LOC's from Banks..

also careful with the fake business loan lenders that say your all approved just send me a little money up front.. in almost all instances they are simply scammers crooks and thieves. 


So what do you recommend? Refinance it or pay it off in a year. One year could be tough to pay off a $10k LOC. What is an example of how to effectively use the LOC? Wish I could use a HELOC but a lot of banks around here are not offering them.


for me I use the funds for rehab and quick turns never to buy long term assets as 100% financing can put you underwater quickly .. those lines of credits are not intended for downpayment and long term holds.. they are to help you with cash flow in your transactional business thats what they are designed for. And frankly very tough to get U need to have a lot of liquidity have a lot of money in their bank good track record etc etc.. again I am talking about a true bank unsecured LOC.


I agree on being underwater quickly. I have made my fair share of mistakes. Mainly buying on the MLS and at 20% down. So I am trying to find ways to use equity and other avenues without using my own money for the 20% down and rehab work. So basically flips is that what you are saying? What if you use the line of credit to buy an investment property as cash to get a deal? What do you mean help with cash flow in your transactional business?

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Jay Hinrichs#2 General Real Estate Investing Contributor
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Jay Hinrichs#2 General Real Estate Investing Contributor
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Replied Sep 22 2022, 07:31
Quote from @Nathan Frost:
Quote from @Jay Hinrichs:
Quote from @Nathan Frost:
Quote from @Jay Hinrichs:

keep in mind most business lines of credit from a bank TRUE unsecured LOC's are on one year revolvers and they can and are frequently called.. another tid bit is many times they have a 30 day resting period per year.. meaning you have to pay it off and rest it for 30 consecutive days.

these are true unsecured LOC's from Banks..

also careful with the fake business loan lenders that say your all approved just send me a little money up front.. in almost all instances they are simply scammers crooks and thieves. 


So what do you recommend? Refinance it or pay it off in a year. One year could be tough to pay off a $10k LOC. What is an example of how to effectively use the LOC? Wish I could use a HELOC but a lot of banks around here are not offering them.


for me I use the funds for rehab and quick turns never to buy long term assets as 100% financing can put you underwater quickly .. those lines of credits are not intended for downpayment and long term holds.. they are to help you with cash flow in your transactional business thats what they are designed for. And frankly very tough to get U need to have a lot of liquidity have a lot of money in their bank good track record etc etc.. again I am talking about a true bank unsecured LOC.


I agree on being underwater quickly. I have made my fair share of mistakes. Mainly buying on the MLS and at 20% down. So I am trying to find ways to use equity and other avenues without using my own money for the 20% down and rehab work. So basically flips is that what you are saying? What if you use the line of credit to buy an investment property as cash to get a deal? What do you mean help with cash flow in your transactional business?


 OK here is how I have used mine over the years.

I had a 7 figure unsecured LOC that I would buy courthouse steps with.. boom cash buyer go to the bank pull the cashiers checks from my unsurecred line. Then once i get the trustees deed or the Sherrifs deed and its now vested in my name and I can get title insurance.. about 30 to 90 days depending I take that free and clear asset to my same bank and secure it up with my other credit facility that was 8 figures.. they advance normally enough to get all my cash back and then that cash pays off my unsecured LOC.. I use the Unsecured LOC also for rehab funds.. we stabilize then flip them make our profit and pay back the bank.. and depending on rates at the time I was borrowing on these lines at 4 to 7% with one point annually so I could flip say 3 times a year for the same one point.

thats how I use the lines and how most RE business's use them they do NOT use them for down payment on buy and hold as its not prudent to have 100% debt banks dont like that and we dont like it either far to risky when markets change on you like they are now. 

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Nathan Frost
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Nathan Frost
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Replied Sep 22 2022, 07:44
Quote from @Jay Hinrichs:
Quote from @Nathan Frost:
Quote from @Jay Hinrichs:
Quote from @Nathan Frost:
Quote from @Jay Hinrichs:

keep in mind most business lines of credit from a bank TRUE unsecured LOC's are on one year revolvers and they can and are frequently called.. another tid bit is many times they have a 30 day resting period per year.. meaning you have to pay it off and rest it for 30 consecutive days.

these are true unsecured LOC's from Banks..

also careful with the fake business loan lenders that say your all approved just send me a little money up front.. in almost all instances they are simply scammers crooks and thieves. 


So what do you recommend? Refinance it or pay it off in a year. One year could be tough to pay off a $10k LOC. What is an example of how to effectively use the LOC? Wish I could use a HELOC but a lot of banks around here are not offering them.


for me I use the funds for rehab and quick turns never to buy long term assets as 100% financing can put you underwater quickly .. those lines of credits are not intended for downpayment and long term holds.. they are to help you with cash flow in your transactional business thats what they are designed for. And frankly very tough to get U need to have a lot of liquidity have a lot of money in their bank good track record etc etc.. again I am talking about a true bank unsecured LOC.


I agree on being underwater quickly. I have made my fair share of mistakes. Mainly buying on the MLS and at 20% down. So I am trying to find ways to use equity and other avenues without using my own money for the 20% down and rehab work. So basically flips is that what you are saying? What if you use the line of credit to buy an investment property as cash to get a deal? What do you mean help with cash flow in your transactional business?


 OK here is how I have used mine over the years.

I had a 7 figure unsecured LOC that I would buy courthouse steps with.. boom cash buyer go to the bank pull the cashiers checks from my unsurecred line. Then once i get the trustees deed or the Sherrifs deed and its now vested in my name and I can get title insurance.. about 30 to 90 days depending I take that free and clear asset to my same bank and secure it up with my other credit facility that was 8 figures.. they advance normally enough to get all my cash back and then that cash pays off my unsecured LOC.. I use the Unsecured LOC also for rehab funds.. we stabilize then flip them make our profit and pay back the bank.. and depending on rates at the time I was borrowing on these lines at 4 to 7% with one point annually so I could flip say 3 times a year for the same one point.

thats how I use the lines and how most RE business's use them they do NOT use them for down payment on buy and hold as its not prudent to have 100% debt banks dont like that and we dont like it either far to risky when markets change on you like they are now. 


That makes sense my only concern is flipping a house at the courthouse steps usually has a 2 year redemption period before you can sell it. So for those two years is that where you take the asset and get it secured in a bank loan for those 2 years to clear the LOC and then sell it in 2 years?

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Jay Hinrichs#2 General Real Estate Investing Contributor
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Jay Hinrichs#2 General Real Estate Investing Contributor
  • Real Estate Broker
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Replied Sep 22 2022, 07:47
Quote from @Nathan Frost:
Quote from @Jay Hinrichs:
Quote from @Nathan Frost:
Quote from @Jay Hinrichs:
Quote from @Nathan Frost:
Quote from @Jay Hinrichs:

keep in mind most business lines of credit from a bank TRUE unsecured LOC's are on one year revolvers and they can and are frequently called.. another tid bit is many times they have a 30 day resting period per year.. meaning you have to pay it off and rest it for 30 consecutive days.

these are true unsecured LOC's from Banks..

also careful with the fake business loan lenders that say your all approved just send me a little money up front.. in almost all instances they are simply scammers crooks and thieves. 


So what do you recommend? Refinance it or pay it off in a year. One year could be tough to pay off a $10k LOC. What is an example of how to effectively use the LOC? Wish I could use a HELOC but a lot of banks around here are not offering them.


for me I use the funds for rehab and quick turns never to buy long term assets as 100% financing can put you underwater quickly .. those lines of credits are not intended for downpayment and long term holds.. they are to help you with cash flow in your transactional business thats what they are designed for. And frankly very tough to get U need to have a lot of liquidity have a lot of money in their bank good track record etc etc.. again I am talking about a true bank unsecured LOC.


I agree on being underwater quickly. I have made my fair share of mistakes. Mainly buying on the MLS and at 20% down. So I am trying to find ways to use equity and other avenues without using my own money for the 20% down and rehab work. So basically flips is that what you are saying? What if you use the line of credit to buy an investment property as cash to get a deal? What do you mean help with cash flow in your transactional business?


 OK here is how I have used mine over the years.

I had a 7 figure unsecured LOC that I would buy courthouse steps with.. boom cash buyer go to the bank pull the cashiers checks from my unsurecred line. Then once i get the trustees deed or the Sherrifs deed and its now vested in my name and I can get title insurance.. about 30 to 90 days depending I take that free and clear asset to my same bank and secure it up with my other credit facility that was 8 figures.. they advance normally enough to get all my cash back and then that cash pays off my unsecured LOC.. I use the Unsecured LOC also for rehab funds.. we stabilize then flip them make our profit and pay back the bank.. and depending on rates at the time I was borrowing on these lines at 4 to 7% with one point annually so I could flip say 3 times a year for the same one point.

thats how I use the lines and how most RE business's use them they do NOT use them for down payment on buy and hold as its not prudent to have 100% debt banks dont like that and we dont like it either far to risky when markets change on you like they are now. 


That makes sense my only concern is flipping a house at the courthouse steps usually has a 2 year redemption period before you can sell it. So for those two years is that where you take the asset and get it secured in a bank loan for those 2 years to clear the LOC and then sell it in 2 years?


 not sure what state your in..  But I dont think ( and i could be way wrong) but true sherrif sales or trustee sales in Texas have no right of redemption ..  it could be tax' sales that have rights of redemption but I dont really know since i have never bought one in that state.. My states were 

IN  MO CA OR WA NV I worked those markets. 

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Nathan Frost
  • Rental Property Investor
  • Wichita Falls, TX
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Nathan Frost
  • Rental Property Investor
  • Wichita Falls, TX
Replied Sep 22 2022, 08:32
Quote from @Jay Hinrichs:
Quote from @Nathan Frost:
Quote from @Jay Hinrichs:
Quote from @Nathan Frost:
Quote from @Jay Hinrichs:
Quote from @Nathan Frost:
Quote from @Jay Hinrichs:

keep in mind most business lines of credit from a bank TRUE unsecured LOC's are on one year revolvers and they can and are frequently called.. another tid bit is many times they have a 30 day resting period per year.. meaning you have to pay it off and rest it for 30 consecutive days.

these are true unsecured LOC's from Banks..

also careful with the fake business loan lenders that say your all approved just send me a little money up front.. in almost all instances they are simply scammers crooks and thieves. 


So what do you recommend? Refinance it or pay it off in a year. One year could be tough to pay off a $10k LOC. What is an example of how to effectively use the LOC? Wish I could use a HELOC but a lot of banks around here are not offering them.


for me I use the funds for rehab and quick turns never to buy long term assets as 100% financing can put you underwater quickly .. those lines of credits are not intended for downpayment and long term holds.. they are to help you with cash flow in your transactional business thats what they are designed for. And frankly very tough to get U need to have a lot of liquidity have a lot of money in their bank good track record etc etc.. again I am talking about a true bank unsecured LOC.


I agree on being underwater quickly. I have made my fair share of mistakes. Mainly buying on the MLS and at 20% down. So I am trying to find ways to use equity and other avenues without using my own money for the 20% down and rehab work. So basically flips is that what you are saying? What if you use the line of credit to buy an investment property as cash to get a deal? What do you mean help with cash flow in your transactional business?


 OK here is how I have used mine over the years.

I had a 7 figure unsecured LOC that I would buy courthouse steps with.. boom cash buyer go to the bank pull the cashiers checks from my unsurecred line. Then once i get the trustees deed or the Sherrifs deed and its now vested in my name and I can get title insurance.. about 30 to 90 days depending I take that free and clear asset to my same bank and secure it up with my other credit facility that was 8 figures.. they advance normally enough to get all my cash back and then that cash pays off my unsecured LOC.. I use the Unsecured LOC also for rehab funds.. we stabilize then flip them make our profit and pay back the bank.. and depending on rates at the time I was borrowing on these lines at 4 to 7% with one point annually so I could flip say 3 times a year for the same one point.

thats how I use the lines and how most RE business's use them they do NOT use them for down payment on buy and hold as its not prudent to have 100% debt banks dont like that and we dont like it either far to risky when markets change on you like they are now. 


That makes sense my only concern is flipping a house at the courthouse steps usually has a 2 year redemption period before you can sell it. So for those two years is that where you take the asset and get it secured in a bank loan for those 2 years to clear the LOC and then sell it in 2 years?


 not sure what state your in..  But I dont think ( and i could be way wrong) but true sherrif sales or trustee sales in Texas have no right of redemption ..  it could be tax' sales that have rights of redemption but I dont really know since i have never bought one in that state.. My states were 

IN  MO CA OR WA NV I worked those markets. 

 I am in Texas.  I have always seen good deals at the courthouse steps which is the tax sales just wanted to see how to make those deals work if you can't sell them in 2 years but I could be wrong on that.  Or is it that you can sell the property just have to disclose in the sell that the original owner could redeem it up to a certain date? 

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Greg H.
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Greg H.
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ModeratorReplied Sep 22 2022, 09:06

@Nathan Frost

Sheriff and trustee sales happen at the court house. Trustee sales(standard foreclosure) have no redemption period nor does a Sheriff sale to satisfy a judgment. Tax sales have a 180 day or 2 years if a homestead. However, one has a difficult time obtaining title insurance for 2 years therefore limiting sales to those who pay cash and are willing to forgo title insurance

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Benjamin Aaker
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  • Brandon, SD
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Benjamin Aaker
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  • Brandon, SD
Replied Sep 22 2022, 09:15

I use a business line of credit frequently in my investing. The type I use is secured by the property, much link your primary mortgage. Because a bank rarely is interested in being second lienholder on a property, I have always used the same bank for the primary mortgage to extend the line of credit. I don't think its correct to say that banks aren't doing these loans, just that they rarely do them if they don't already have the mortgage. I recommend you talk to your bank's commercial banker and ask. My lines of credit usually are 1-2% higher rate and are variable. They should be paid off quickly, but do give readily available cash for when you need it and are low cost to maintain.

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Nathan Frost
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Nathan Frost
  • Rental Property Investor
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Replied Sep 22 2022, 09:26
Quote from @Benjamin Aaker:

I use a business line of credit frequently in my investing. The type I use is secured by the property, much link your primary mortgage. Because a bank rarely is interested in being second lienholder on a property, I have always used the same bank for the primary mortgage to extend the line of credit. I don't think its correct to say that banks aren't doing these loans, just that they rarely do them if they don't already have the mortgage. I recommend you talk to your bank's commercial banker and ask. My lines of credit usually are 1-2% higher rate and are variable. They should be paid off quickly, but do give readily available cash for when you need it and are low cost to maintain.

So tell me if this is how I could use my LOC.  Go find a property at the tax sales on the first Tuesday of the month or Auction.com.  Buy it with the LOC and try to flip it under 12 months.  If I can't flip it, refinance that asset with a bank, and then rent the property out to pay that loan or just pay on it till I can flip it?  Does that sound about right how investors use this strategy.  Cause LOCs usually are due in full after 12 months.  

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Louis Martinez
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Louis Martinez
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Replied Sep 22 2022, 13:37

@Jay Hinrichs thanks for the breakdown.

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Jay Hinrichs#2 General Real Estate Investing Contributor
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Jay Hinrichs#2 General Real Estate Investing Contributor
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Replied Sep 22 2022, 13:49
Quote from @Louis Martinez:

@Jay Hinrichs thanks for the breakdown.


 Keep in mind I am talking TRUE unsecured loc from my community bank that I have been with over 25 years.  

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Benjamin Aaker
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Benjamin Aaker
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Replied Sep 22 2022, 14:35
Quote from @Nathan Frost:
Quote from @Benjamin Aaker:

I use a business line of credit frequently in my investing. The type I use is secured by the property, much link your primary mortgage. Because a bank rarely is interested in being second lienholder on a property, I have always used the same bank for the primary mortgage to extend the line of credit. I don't think its correct to say that banks aren't doing these loans, just that they rarely do them if they don't already have the mortgage. I recommend you talk to your bank's commercial banker and ask. My lines of credit usually are 1-2% higher rate and are variable. They should be paid off quickly, but do give readily available cash for when you need it and are low cost to maintain.

So tell me if this is how I could use my LOC.  Go find a property at the tax sales on the first Tuesday of the month or Auction.com.  Buy it with the LOC and try to flip it under 12 months.  If I can't flip it, refinance that asset with a bank, and then rent the property out to pay that loan or just pay on it till I can flip it?  Does that sound about right how investors use this strategy.  Cause LOCs usually are due in full after 12 months.  
 Thanks for clarifying @Jay Hinrichs. I'm talking about a secured line of credit on a current property. Sounds like you already have a LOC lined up. You'll want to pay off the LOC as fast as you can, due to the higher interest rate, and then so you can reuse it. You should have a plan to either refinance or sell it and so should talk to banks right now to get an idea about what they would offer you. The unsecured LOC products, I'll refer to Jay's experience and great advice. For the secured LOC, I don't have to pay it off within 12 months. Again, talk to your bank.

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Jay Hinrichs#2 General Real Estate Investing Contributor
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Jay Hinrichs#2 General Real Estate Investing Contributor
  • Real Estate Broker
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Replied Sep 22 2022, 14:39
Quote from @Benjamin Aaker:
Quote from @Nathan Frost:
Quote from @Benjamin Aaker:

I use a business line of credit frequently in my investing. The type I use is secured by the property, much link your primary mortgage. Because a bank rarely is interested in being second lienholder on a property, I have always used the same bank for the primary mortgage to extend the line of credit. I don't think its correct to say that banks aren't doing these loans, just that they rarely do them if they don't already have the mortgage. I recommend you talk to your bank's commercial banker and ask. My lines of credit usually are 1-2% higher rate and are variable. They should be paid off quickly, but do give readily available cash for when you need it and are low cost to maintain.

So tell me if this is how I could use my LOC.  Go find a property at the tax sales on the first Tuesday of the month or Auction.com.  Buy it with the LOC and try to flip it under 12 months.  If I can't flip it, refinance that asset with a bank, and then rent the property out to pay that loan or just pay on it till I can flip it?  Does that sound about right how investors use this strategy.  Cause LOCs usually are due in full after 12 months.  
 Thanks for clarifying @Jay Hinrichs. I'm talking about a secured line of credit on a current property. Sounds like you already have a LOC lined up. You'll want to pay off the LOC as fast as you can, due to the higher interest rate, and then so you can reuse it. You should have a plan to either refinance or sell it and so should talk to banks right now to get an idea about what they would offer you. The unsecured LOC products, I'll refer to Jay's experience and great advice. For the secured LOC, I don't have to pay it off within 12 months. Again, talk to your bank.
Secured and unsecured loc are apples and oranges.  Unsecured tied to prime and moves that quickly. With a floor of 5% 
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