Using personal line of credit for down payment on rental property

Private Lending & Conventional Mortgage Advice
7yFollow

Using personal line of credit for down payment on rental property

Takiyah Riley
Member since 2018 · 13 posts · 4 votes

Hey everyone, So this what I did..I have access to 60K in personal LOC. Instead of using my own capital (16K) I used 30k of my personal LOC for the down payment on a duplex. The all in cost is 85K with an ARV of 125-150K. My plan is to rent out both units (potential $1500 a month) aggressively pay down the LOC enough to get my credit score back to refi standards, since it will more than likely take a dive due to my utilization increasing from maxing out one of the LOC. Once I get my score back I will refi, pay off the remainder of the LOC and continue to make the mortgage payments and collect the positive cash flow. What's your thoughts?

TIA

0Reply
65 views

Most Popular Reply

Jonathan Taylor SmithBusiness Member
Rental Property Investor · Durham / Raleigh (Triangle), NC · Member since 2015 · 840 posts · 801 votes
7y

Hello @Takiyah Riley - I find nothing to be wrong with using a personal LOC as down-payment source to acquire a cash-flow producing asset... That is as long as you account for the LOC payment and interest in your analysis of the opportunity.

Blue Chariot Realty & Management4.915 Reviews
WebsiteView Page
1Reply
See this reply in the discussion

3 Replies

Jump to latestLatest
  • Jonathan Taylor SmithBusiness Member
    Rental Property Investor · Durham / Raleigh (Triangle), NC · Member since 2015 · 840 posts · 801 votes
    7y

    Hello @Takiyah Riley - I find nothing to be wrong with using a personal LOC as down-payment source to acquire a cash-flow producing asset... That is as long as you account for the LOC payment and interest in your analysis of the opportunity.

    Blue Chariot Realty & Management4.915 Reviews
    WebsiteView Page
    1Reply
  • Eric Veronica
    Lender · Cleveland, OH · Member since 2011 · 588 posts · 439 votes
    7y

    @Takiyah Riley are you using a conventional Fannie mortgage?  If yes, an unsecured line of credit is normally an unacceptable source of down payment funds.  A secured line of credit, such as a heloc attached to a different property, is an acceptable source of down payment funds as long as you qualify with the resulting monthly payment. 

    Answer may be different for other types of loans. 

    0Reply
  • Eddie T.
    Rental Property Investor · NY · Member since 2013 · 844 posts · 350 votes
    6y

    @Takiyah Riley What bank do you have the Line Of Credit With?

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free