All Forum Posts by: Chris Teti

Unsecured lines of credit (Business and Personal) based on your personal credit. 

I prefer business LOC's myself, because otherwise, if you sell the property you lose all your working capital.

But using a HELOC is definitely a better approach than a cashout refi. The HELOC won't cost any $$ to put in place, and if you aren't using any of it, you don't pay any interest. If you cash out refi, you're paying closing costs and you are going to be paying on the money you borrowed over the course of 20-30 years regardless if you use it or not.

HELOCs are lines of credit using available equity in your home. So the normal calculation is Appraised value * 70/80% - existing mortgage/leins = HELOC amount. For example if the bank you are working with uses 80% loan to value and your house appraises for $200K and you have a $50K mortgage, they would approve you for a $110K HELOC ($200K * 80% = $160K - $50K mortgage = $110K HELOC). In this example it would be in the 2nd lien position behind your mortgage. Your mortgage would remain untouched and you would have a HELOC that usually is some rate + prime, so it can fluctuate over time.

I hope that helps.

Not HELOC's, but business and personal LOC's, which are better in my opinion as they aren't tied to a specific property and therefore you won't lose your working capital if you need to sell.

Depending on what's hurting your credit (you said not good), sometimes there are strategies to easily improve it, sometimes significantly which will allow you to get your own gap funding. As you mentioned a credit partner may help as well. The other route already mentioned is wholesaling the deal to another investor that has the $$ to do it. You make some $$ for finding the deal and can use that toward the next property. Good luck! 

It's none of my business, but I would strongly caution you against lending a friend money, especially for a 10 year pay back period. The return isn't very good for you in my opinion (you can get better rates of return through investing in other ways) and it only has the potential to become an issue between you and your friend. It will always be a "thing". When you see each other, you will both always think about the loan, and that's if everything is going well. God forbid the friend is late on any payments or falls on hard financial times, it will destroy your friendship.

My recommendation would be to invest the $24K in other ways to get a better rate of return and to help you friend, give them some guidance of how they can come up with the cash on their own. Possibly using unsecured lines of credit, other creative financing options, etc.

Good luck! 

Alpha Funding. Not sure if they do Arkansas though. They are knowledgeable, fast, and only pull your credit once a year.

First I would go with Business LOC's. But aside from that I would use a HELOC. You are still using the equity in your house, but you aren't paying interest if you aren't using it. If you do a cash out refi, you are not paying interest on all of it for the term of the mortgage (20+ years). Plus HELOC's usually don't cost anything to get where a cash out refi will cost you closing costs.