Security back line of credit for down payment?

Question

Why are security backed lines of credit / pledged asset lines of credit , not spoken more about for investors to use as a down payment for investment  homes ?

What are the pros / cons of using credit line??

Account Closed · Answer

Last year, I sold about 24 homes in Las Vegas, did not do a 1031 Exchange, paid off all the mortgages for my apartment buildings and I've been saving about $180,000 per year in mortgage interest payment. Then, I got a $2 million line of credit with a $250,000 credit card limit and now I have the $2 million available for if a hot deal falls in my lap and I pay only $85 per year for the line of credit if I don't use any of it. So, at the same time, I have the $2 million available and save the $180,000 per year.

I don't know why more people don't talk about getting a line of credit. A strange thing is when I applied for my line of credit my broker friend got all excited, got himself a line of credit and he just purchased a $1.8 million 10-unit building that I found for him two weeks ago.

One thing about getting my line of credit is it took my bank more than 9 months to process the paperwork and I never in my entire life was asked for so many documents and tax records by a lender. I am actually supposed to sign my loan papers this coming week and I don't know what the interest rate is going to be. I may never use it, but at least I have some backup cash just in case something falls in my lap.

Kevin Romines · Answer

Basically what you are talking about is a HELOC or a Commercial line of credit. HELOC's are used all the time for down payments, closing costs and even rehab funds. Commercial lines of credit aren't used as much, but can serve the same function.

Chris K. · Answer

@Kevin Romines not a HELOC, I know those are popular. Leveraging your stock portfolio with a line of credit… surprised not as many people are talking about this. 100k stock portfolio, can take out a line of credit around 70k at 3% interest… ?