50,000 line of credit
Lender · Ponte Vedra, FL · Member since 2013 · 28 posts · 5 votes
Starting a small business and the bank is willing to loan up to a $50,000 dollar line of credit with possibly a $50,000 dollar credit card. Interest rate on the line of credit is 1% plus prime and 5% plus prime for the card. Thoughts on what type of investing I should go from here ? I originally thought fix and flip with the line of credit, but am open to hearing about other creative options for Jacksonville, FL. Thanks in advance.
-Ty
Ty,
What you now have is an opportunity to develop your own business model that works for you, and I encourage you to decide how best to use this operating capital to meet your short and long term goals. The difference between the two strategies is whether you want cash or cash flow, and only you can decide that.
Jacksonville area has opportunities for both strategies. You can flip for under $100k all in, and make upwards of 15% per deal so long as you can find the right deals. If you want to buy and hold rentals using this capital, it will typically require a min of 6-12 months of seasoning with a tenant before you can refinance the property. There are deals for rentals to return between 10-15% ROI in solid neighborhoods.
Study the options that fit your goals, and find someone local to work with who has more experience and can help you evaluate deals. We have a local meetup group organized by @Erik K. where you can network. Best of luck.
can someone elaborate a bit on utilizing a LOC for a small business to purchase real estate? i was not aware that this was possible.
Former military here...we must try for a line of credit at Navy Federal. Wow. I've been doing this a long time and haven't had an LOC like that offered, unsecured. At any rate, I am doing a 5th mortgage right now...they only want one month reserves on the primary loan and 2 months for the investment loans. I'm not adding a whole lot, but reserves are a sticky wicket.
Yeah I was suprised too. Just message me if you want some more information or the guy I have been talking too. I was originally talking to them about the investment loans they offer but this seemed more flexible.
I definitely support what @William Byers said.
Just a few random thoughts:
-It's been a little tough for us here in Jax to find favorable refi options, but if you have strong income outside RE (which we don't really) then it might be much easier for you. We do have deals with some partners who make HUGE income, and found banks that were thrilled to offer HELOC in those instances.
-I'm not sure 50k is enough to flip with, unless you have more cash to work with. You'd be looking at flips with a total profit of maybe 10-15k, meaning very little cushion.
-I don't think you'll find much on the county foreclosures either. In that range you are looking at condos with HOA lien, that's about it.
-The idea of using your LOC for down-payments would be great, but it will be hard to get traditional financing. Hard money is out there but the rates might make or break your deal, or add too much risk. I've seen a handful of decent deals with seller-financing offered, so that's certainly possible.
-I don't mean to sound pessimistic, just some issues/concerns to consider. Definitely network, perhaps seek an experienced partner, or if you take a project on your own I think it might just take a bit more time to find the right deal. That's all...
Good luck!
Ty D,
I like your approach of using your LOC and CC in conjunction to buy and fix/flip/rent properties. Just be sure to keep your lines of credit and payments straight! Hahaha...But seriously, keep in mind how you would utilize that CC with regards to paying for things.
Will your contractor take CC for payment? Or, will you utilize convenience checks to access the amount available? Keep those extra fees in mind as they will add up.
As a mortgage banker, I'll tell you it's easier to refinance a traditional investment property (NOO or Non-Owner Occupied) with at least 50% equity. 75% is doable, but at 50%, restrictions and guidelines become more favorable. Lenders usually allow rental income to be used in qualifying at the 50% mark, although 2 years of rental/lease income history are usually required.
Of course I'm referring to conventional lending, whereas private money will come at a higher rate albeit with more flexible terms.
Good luck! Hit me up if you have any further questions with regards to lending.
Cheers,
John
I love the reality check man. Thats what I was looking for was a little more word about the Jacksonville lay down. I certainly have some research and networking to do in Jacksonville and in no rush to jump into a deal for the sake of a deal. We do have some personal cash we can use if need be, but just looking for some creative solution to start this crazy ride in Real Estate and have been talking to William. You guys both have been a wealth of help. Hope we can meet up sometime in Jacksonville and do some more talking, maybe even partner up on a deal.
Ty D,
I like your approach of using your LOC and CC in conjunction to buy and fix/flip/rent properties. Just be sure to keep your lines of credit and payments straight! Hahaha...But seriously, keep in mind how you would utilize that CC with regards to paying for things.
Will your contractor take CC for payment? Or, will you utilize convenience checks to access the amount available? Keep those extra fees in mind as they will add up.
As a mortgage banker, I'll tell you it's easier to refinance a traditional investment property (NOO or Non-Owner Occupied) with at least 50% equity. 75% is doable, but at 50%, restrictions and guidelines become more favorable. Lenders usually allow rental income to be used in qualifying at the 50% mark, although 2 years of rental/lease income history are usually required.
Of course I'm referring to conventional lending, whereas private money will come at a higher rate albeit with more flexible terms.
Good luck! Hit me up if you have any further questions with regards to lending.
Cheers,
John
John thats awesome to hear about the 50%, instead of buying 4 properties with 25% down maybe start with one or two with over 50% down. I will talk to my bank that im working the LOC through and see what they think, nothing ever hurts to ask. Thanks for the input and extending the invite to contact you.
One thing you need to bear in mind is that unlike personal reserves, windfalls, earned income, savings, etc an LOC is leveraged capital that you'll be paying interest on. I remember not too many years ago in '08-'11 when the whole fix and flip thing started steaming up and folks with limited funds, especially leveraged funds, via hard money lenders were jumping into the fray like a leaky sieve only to be stifled long term turnarounds on the flip side.
In the first couple of years, and I'm talking the San Diego Market only, the rapid fire turnaround time on F&F was as fast as 30 days, then 60, then 90 and soon some flips were taking as long as 120-160 DOM before flippers were revisiting their capital and repaying their hard money lenders.
It didn't take too long for HML's to start getting a little spooked and calling their notes putting many investors in peril and some OOB altogether. Just sayin.......................
Ty,
You are absolutely correct that it never hurts to ask! What's the worst they can tell you, "no"? OK, you're in the same boat as you were!
In my opinion, you should focus on 1 or 2 properties at first and see how the entire process works (i.e. search, find, buy, fix, hold & refi equity out/sell & cash-out, rinse & repeat), to give yourself a good knowledge base to pull from.
However, I am sure there are more seasoned investors who would chime in as to their experiences. I'm just jumping back into the game and working with a very conservative partner.
John A, you are absolutely correct! BTW, I'm a So Cal native looking to move to North County SD as soon as possible. Love the Leucadia/Encinitas area as my gf grew up in east county.
I'd like to start investing in that area as well, since we plan on living in SD. Is there a strong REI group locally to you?
@Ty Downing I'm curious as to how your 50k LOC panned out with NFCU? I recently formed my LLC, am a Veteran and have been shopping around for LOC start up capitol. Is there a minimum number of years that they require your business to be established? Thanks!
@Ty Downing I'm curious as to how your 50k LOC panned out with NFCU? I recently formed my LLC, am a Veteran and have been shopping around for LOC start up capitol. Is there a minimum number of years that they require your business to be established? Thanks!
I think 2 years is a good bet for your business to have behind it, however I hear it can be done with less. I just got over $50k revolving credit setup and because it's business credit, I can max that out and it won't affect my personal credit score. I will be using that to fund the rehabs while I use personal funds to take down properties. Once I sell the property, I just pay off the LOC and repeat. Apparently, in 6 months I can apply for 3 times as much.
It was an easy process in the end and took about a month, but you do need to have decent personal credit of about 700+. More than happy to share those details.
Starting a small business and the bank is willing to loan up to a $50,000 dollar line of credit with possibly a $50,000 dollar credit card. Interest rate on the line of credit is 1% plus prime and 5% plus prime for the card. Thoughts on what type of investing I should go from here ? I originally thought fix and flip with the line of credit, but am open to hearing about other creative options for Jacksonville, FL. Thanks in advance.
-Ty
It depends on what sort of a risk taker you may be and resources currently available. If all you have is the line of credit without substantial or sufficient cash reserves to service a rehab project loan and for however long it takes to sell the property (unless you are buying with cash), you may want try wholesaling first.