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Shaka Farrier
  • Norfolk, VA
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Can I use Business Line for Hard Money down payment and points?

Shaka Farrier
  • Norfolk, VA
Posted Feb 8 2016, 14:15

Hey BP, I hope is well in your ventures. I am working on getting funding for my first fix and flip and wanted your opinions on my way in without spending much (or any) out of pocket money.

Current situation:

Business Line of Credit : $15,000 @ 16%

Business Credit Card: $10,000 @ 10.9%

(Zero balances on both)

Liquid Reserves: $10,000 (personal account)

Here are my hard money lenders terms:

Finance 90% of Purchase + Repairs or up to 75% of the ARV, whichever is lower

12.99% APR

3.9 points at closing + credit line admin fee (if applicable)

2 year term

No pre-pay penalty

I plan on purchasing low at first. I'm looking to be $60k-$75k all-in (property and rehab)

My questions are: 

1) My lender recommends having 20% capital upfront. 10% for the downpayment, 4% points and 6% for cash reserves. He also requires a bank statement(s) to show the funds (they do not need to be seasoned).

I'm thinking about writing a check to myself for $10k from the LOC and putting it with my $10k reserves. That way I can show the 20% he needs to see on my statement.

Heres the tricky part I need help with:

After he approves me and I receive the proof of funds, can I take the $10k I moved from my LOC and put it back before I have to make a payment? I figure, once he sees it in the account via the bank statement, why keep the $10k in the account if I won't need it for the down payment or points.

2) What would you consider a good ARV for this amount to work? I want to make sure that when I get the comps pulled, I will have a decent spread to profit.

I hope I explained this without confusing everyone. I look forward to seeing your responses

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