Waxahachie, TX · Member since 2017 · 13 posts · 2 votes
Trying to get my head wrapped around the "line of credit" on a rental property. I found a bank that would do a LOC on a paid for rental property. My thought was to have a LOC just as "available" funds vs cash out refinancing the property. 1% org and $450 to close to obtain a LOC? Is this a strategy commonly used just to have some back up resources, if needed to fund rehabs/cash offers instead of using all or most of my personal cash reserves. The plan would be to pay that money back into the LOC before the draw ends, but depleting our resources is what is keeping us from moving forward on other properties. Any insight would be helpful..Thanks BP..
This is a common strategy - an even more common strategy is getting a HELOC on a primary home. If the numbers on the LOC make sense for your criteria it is a great option to free up cash without giving up your investment. A cash out refinance may also be a good option with the low rates right now, you may even be able to drop your rate low enough as to offset the additional debt.
Bottom line, the more funds you have available the more options you will have.
@Jameson Gowin, ask yourself: how is taking out a LOC (or cash out Refi) to buy more positive cashflow / bargain properties "depleting your resources"?
As for whether this strategy is common, here at Bigger Pockets it's probably the most popular strategy recommended (click on the magnifying glass 'Search'. There are literally hundreds if not thousands of prior threads on this very topic). Cheers...