Rental Property Investor · NJ · Member since 2018 · 47 posts · 10 votes
Hey BP.
I’m in the Northern New Jersey area trying to find the best ways to fund deals through either personal or business lines of credit. Has anyone had luck finding a company or institution that provides these funding tools with great terms?
Real Estate Broker · Winthrop, MA · Member since 2014 · 260 posts · 199 votes
6y
Hi @Web A. - I have a few questions and Ill leave my thoughts. Are you looking to use the LOC to finance the down payment portion, or the whole amount of the purchase? What defines Great Terms?
Personal lines of credit are often un-secured, and therefore by definition, really BAD terms lol. The interest is fixed or variable and high. Often these personal lines of credit are also underwritten to make sure you, in the terms - loan depending , cannot use them to buy real estate. For instance, SoFi, its a great personal loan company that will often write a line of credit, income and credit depending, personally for up to 100k. That being said, you need to sign something saying that you cant use it to buy real estate.
For business lines of credit, you have to obviously have a business, typically be in business for 1-2 years minimum, and show substantial revenue in order to qualify to be lend $ - especially on this cash basis line of credit. That has less restrictions, but depending on who you are using to finance the rest of the property if you are only speaking about the down payment, might take objection to you essentially 100% financing something with the LOC and a mortgage. Hopefully this helps...
What I would tell you is google around where you live in NJ and find a small local credit union as they are a little more flexible with terms. You may find a portfolio lender that wont sell its loans, so might be more liberal in its underwriting terms. Make sense? Good luck!
Real Estate Broker · Winthrop, MA · Member since 2014 · 260 posts · 199 votes
6y
Hi @Web A. - I have a few questions and Ill leave my thoughts. Are you looking to use the LOC to finance the down payment portion, or the whole amount of the purchase? What defines Great Terms?
Personal lines of credit are often un-secured, and therefore by definition, really BAD terms lol. The interest is fixed or variable and high. Often these personal lines of credit are also underwritten to make sure you, in the terms - loan depending , cannot use them to buy real estate. For instance, SoFi, its a great personal loan company that will often write a line of credit, income and credit depending, personally for up to 100k. That being said, you need to sign something saying that you cant use it to buy real estate.
For business lines of credit, you have to obviously have a business, typically be in business for 1-2 years minimum, and show substantial revenue in order to qualify to be lend $ - especially on this cash basis line of credit. That has less restrictions, but depending on who you are using to finance the rest of the property if you are only speaking about the down payment, might take objection to you essentially 100% financing something with the LOC and a mortgage. Hopefully this helps...
What I would tell you is google around where you live in NJ and find a small local credit union as they are a little more flexible with terms. You may find a portfolio lender that wont sell its loans, so might be more liberal in its underwriting terms. Make sense? Good luck!
Health Care Administration · Philadelphia, PA · Member since 2015 · 65 posts · 65 votes
6y
@Web A. - I agree with @Seth Williams that you might not get what you consider great terms on an (unsecured) personal line of credit, which makes sense because it is unsecured. I would maybe start with the banks/credit unions that you already bank with and see what options they have available. Since you already have banking history with that institution, they may be more likely to extend a credit line to you. Or call around to local credit unions like Seth had mentioned, and consider opening a checking/savings account with them if that is what it takes to establish a line of credit.
I opened up 2 unsecured personal lines of credit in the past year. The first one I opened with Sun Federal Credit Union, who I already have a HELOC with. I requested a $30,000 line of credit, and they ended up giving me a $15,000 unsecured line of credit at prime rate +3.25% (so currently 8%). Then I requested a $25,000 from Wells Fargo, who has been my bank for many years. They gave me the full $25,000 (I guess I could have requested more) unsecured line of credit for prime rate +6.25% (so currently at 11%).
Rental Property Investor · NJ · Member since 2018 · 47 posts · 10 votes
6y
@Seth Williams
You provided great thoughts on this topic thank you. To answer your question, I want to leverage LOC, whether it's business or personal LOC, in order to put down on the purchase price and average repair costs.
Rental Property Investor · NJ · Member since 2018 · 47 posts · 10 votes
6y
@Richard Jahnle
Thank you for responding. I went and received a personal line of credit from Wells Fargo for $15,000 a year ago at 10.25% and want to tap into more capital. Do you know if there is a limit on the number of personal lines your able to open with different institutions.
Health Care Administration · Philadelphia, PA · Member since 2015 · 65 posts · 65 votes
6y
@Web A. - I am not sure. With the Wells Fargo PLOC, I was told that the most important thing they looked at was credit score, although they did also ask me to list my income, expenses, assets, etc. I applied online and was approved almost instantly.
With my credit union, I submitted much more financial information, and it took almost a month for them to approve the credit line and they periodically asked for more of my financial info. They asked if I had other LOCs, so maybe they would have held it against me the more lines I had. I guess the only way to find out is ask.
You could go back to Wells Fargo now that you have had the credit line open for a year and see if they will raise your limit.
Real Estate Broker · Winthrop, MA · Member since 2014 · 260 posts · 199 votes
6y
Just reminder that the more lines you pull the more its going to effect your debt to income ratio, and therefore effect your potential future financing a deal, so make sure you talk it thru / think it thru if you plan on leveraging that.
Rental Property Investor · South Jersey · Member since 2019 · 9 posts · 4 votes
6y
@Web Annacius
are you looking to make it a cash purchase, fix it up and then refi?
I am in the process of getting a business line of credit right now. It’s a lot of paperwork. But I feel like it could be the best route to go once I have access to it.
Rental Property Investor · NJ · Member since 2018 · 47 posts · 10 votes
6y
@Luke Bonus
Yes. My intentions are to purchase, rehab, and refinance out cash.
Is your business seasoned? How much are you able to access? I ask because my business is not seasoned so I assume the terms would be more in favor for a seasoned business with a LOC. What are your thoughts.
Rental Property Investor · South Jersey · Member since 2019 · 9 posts · 4 votes
6y
@Web Annacius
Yes we have been in business for a long time. When I spoke to the bank we use she said the LOC we would have access to could be up to $250k. So right now we are going over all of the paperwork. It's taking longer than I would have hoped as there is a deal I'm interested in right now.
Rental Property Investor · New Orleans, LA · Member since 2018 · 87 posts · 45 votes
6y
@Web Annacius I have two BLOCs under different LLCs one for 25k and one for 30k neither one needed seasoning. Had both within 1-2 weeks of creating the LLCs.
Real Estate Broker · Winthrop, MA · Member since 2014 · 260 posts · 199 votes
6y
@Dominique Palmer correct! You are dead on. I’ve yet to find someone who doesn’t do seasoning on the loans but I haven’t looked that hard to be honest with you
Developer · NY/NJ/PA · Member since 2018 · 758 posts · 935 votes
6y
Most of the online business LOC rates are insane.
I have multiple business line of credits all through big banks. Usually the rate is around 6% to start. After the first year they usually hang around 7.5-8.5%. Cheaper than hard money and equity. I use them as emergency gap funding.
But I have multiple businesses with over 2 years, one with substantial revenue.