Strategy for 1 million line of credit and some cash

[Fred Huynh]

Hello fellow biggerpockets members! 

Long time lurker/reader and first time poster.  

So I came upon an interesting situation recently. I was saving up to BRRRR my first house until I had a conversation with a friend of mine. Long story short, we decided to team up. He got us a 1 million dollar line of credit that can be used on 8 homes and we have about 180k in cash. Given this situation, I wasn't sure how to maximize our current situation. We can definitely BRRRR using both the credit line and cash, but I'm wondering if there's any other strategies that would be beneficial? We were wanting to hold long term and rent, but will listen to any suggestions.

Here are the terms of the line of credit:

Facilities: A new, up to $1,000,000, master LOC allowing for a maximum of 8 individual home purchase & remodel subordinate notes (sub-notes) beneath it at any time, with interest-only payments, paid monthly. Following the six-month interest only period, each note will automatically convert to a 240 month fully amortizing term note with monthly principal and interest payments. Purpose: Sub-notes will be originated for the acquisition, rehab, and marketing of 1-4 family homes as rental properties for the initial 6 months, then later converted to fully amortizing term notes. LTV / Amortization: Sub-notes written under the Master line of credit will be limited to the lesser of 80% of an as-improved appraised value or 90% of the proposed cost of acquisition and improvements (“cost of acquisition and improvements” will exclude: projected interest expense, referral fees, and/or projected profit). Following an initial 6-month interest only period for the rehabilitation and marketing of the property, each sub-note will convert to a fully amortizing 240-month term note. Term: Master LOC: will have an initial 12-month term that may be evaluated for renewal annually at maturity date. During the active term of the Master line, borrower will have the ability to originate sub-notes beneath it per the terms outlined, provided there are funds available under the Master line’s commitment balance.

Any suggestions or comments would be welcomed.

Thanks in advance!