Using a Line of Credit vs. Cash

[Sunny Shakhawala]

Hey Everyone,

Today I was at the bank and I saw a heavy push for Lines of Credit. (Home, Business, etc.)  There were posters, ads on the tv, stand up signs, etc. 

I just completed my second Private Lending deal. I'm getting 8% with a first lien on the property. I'm thinking to myself, should I open a Line of Credit at 3.5% and net the difference? Or just pocket the entire 8%?

I guess my question is, do you recommend using an LOC if I have a surplus of cash in bank? If yes, why? If not, I guess it's self-explanatory. 

My thoughts - Using an LOC is like using OPM. But at the end of the day, I have to pay it back anyway, and the cash that can cover the deal is sitting in my bank account anyway... I guess I should only really consider LOCs for when my cash is tied up in numerous deals? At which point... should I even take the risk of utilizing an LOC if I'm spread so thin?

What am I missing here?

[Derrick W.]

I have a loc and use it a lot. My savings/reserves never get touched and are slowly growing.  I use my loc for the down payments on new houses then pay it off with my cash flow.  As soon as it's paid off I buy another house. I'm very happy with how this is working.