David Greene's method in podcast 327

[Ryan Keenan]

Hey BP, I listened to podcast 327 a few times and trying to figure out what David Greene was talking about when he said he got a commercial line of credit for 500k and then bought a few houses, rehabbed them until the line was used up. Once the line was used up he refinanced them into one commercial loan and then restarted the process once the line was paid back? Do I understand it correctly? How do you get a 500k line of credit? Once you have one or two houses on the line you probably are not cash flowing yet because you are paying higher rates? Thanks for the help! Ryan

[Bill Goodland]

The commercial LOC is essentially borrowing cash at a certain interest rate. The same way your cash is replenished at the end of a BRRRR ideally, so is a LOC. Depending on your income and credit, you can probably get a bank to give you a 50k LOC at a relatively high interest rate. Upon more business with the bank and real estate experience, you may be able to negotiate a high limit and lower interest rate. The benefit is, when you want to buy a property cash, you don't have to contact private or HML and just use the LOC while only accruing interest when it is in use.

For example, buy 5 houses with purchase and rehab budget of 100k per house. After rehab, each home has an ARV of 135k and get mortgages at 75% LTV(individually or blanket mortgage to save on closing costs). 5 houses x 135k value per house = 675 total assets value, bank loans 75% LTV so you get 500k back, pay off LOC, rinse and repeat with 5 new cash flowing assets.