Opening a CC or LOC under a different business to help fund RE

[Kristin Drumheller]

My husband and I own a successful health facility and are frequently bombarded with offers for credit cards and lines of credit. I typically throw these away but we are starting to get our ducks in a row to begin our next venture in real estate. I understand the biggest issue for many is funding, we would have access to a large line of credit through our other business but I’m not sure of the legality of using that for our real estate business. Does anyone have insight on that or experience with multiple business financing?

Thanks!

[Andrew Postell]

@Kristin Drumheller this is actually a very good idea if you can manage it. A Line of Credit will allow you to immediate funding without, in theory, the need to borrow from a hard money lender. Your LOC should be a lower rate than any HML out there. There is one draw back though....with no lender involved that means no lender is checking your work. You need to know exactly how to calculate ARV accurately. Other than that though this is a great product to have as an investor.

The "management' part of the LOC strategy is managing your variable interest rate. Meaning, the LOC is not designed for long term financing. It's just for temporary financing. So if you are flipping, you will pay back your LOC each time when you sell the property. Pay back the LOC, keep the proceeds and repeat. But if you are buying and holding then you need to refinance. There are some specific rules do buying a property with cash or a LOC and I have highlighted the correct strategy on how to setup that structure HERE.  Feel free to tag me with any questions.

Thanks for posting!