All Forum Posts by: Chris Teti

Unsecured business lines of credit + Hard Money.

@Shiann Thrower  Hi Shiann, the main criteria for business credit cards is your personal credit profile. I don't know what that looks like, but there are quite a few things that could cause that. Any late payments, a light file, high utilization, etc. There are ways around it though depending on your situation.

This is something you should really discuss with your CPA. To make sure you are moving the $$ around in the best way not only from a tax perspective, but also to make sure you aren't opening your personal assets to any liability if something happens in your investment property.

My opinion would be, I think you handle it as 2 independent things. You pay back each lender from your investment property (your other LLC and yourself), and then each of those pay their own lenders from whatever revenue/income you have. Paying the mortgage originators directly from your end investment property seems like a bad idea as you would be mixing funds.

@Greg Todrank It's probably coming from the lender. I'm not sure who your lender is, but usually the lender sets a limit to the concessions allowed that have to be approved by the seller. It usually signifies to the seller that you don't have the cash for it yourself and therefore increases the risk of the deal falling apart, which would cost the seller time and missed opportunities while the property is off the market. From a lenders perspective they usually do care about these things because they want to make sure they get their money paid back to them. If it's a financially tight deal or you don't have the money to properly support and maintain the property, especially if you don't have much "skin in the game", it's a riskier proposition for the lender. 

@Jack Miller, it really depends on the lender if they would allow a personal loan, credit card, or line of credit to be used for down payment $$. Usually if it is a traditional residential mortgage, they will want seasoned funds. If you are working with a HML, they are usually more flexible.

The strategy I like is to use 0% business credit cards or a business line of credit to use for gap funding along with a HML to fund the purchase and renovation. Once it is renovated and rented out, you can refinance longer term with a commercial lender or a HML with long term rental loans. If the #'s work, you will have enough equity to pay off the lines and be able to use them for your next deal.

It's pretty common to use business lines of credit (credit cards, checkbook lines, etc) for your gap funding. It works better with a hard money lender that doesn't require seasoned funds like a residential mortgage company will. After the promotional period, the interest rate does jump up, usually in the 10-20% range in my experience. From there if you manage them the right way, lenders will send you more 0% offers to continue the strategy. In addition, if you are using them for down payment or renovations, if the #'s work it often isn't a big deal to use a higher interest rate on a portion of your deal for a few months until you can sell the property or refinance out long term to pay off your lines. Especially if you wouldn't otherwise be able to do the project. For example if you can do a flip and use even a 20% card for your down payment $$ and you'll make $30K, do you care that your down payment $$ interest rate is higher than you like? 

@Shane Wolf MB Capital Solutions

Hi, the two methods I prefer is the whole life policy and unsecured lines of credit. I feel they give you the best returns and keep your own cash out of the deals. Either you are using all bank money (lines of credit) and borrowing against your policy (which is still growing). Any other method is leaving money on the table or locking down your money in my opinion. 

@Ross Yeager  Yeah, I work with alot of investors and help them with using unsecured lines of credit (credit cards and traditional lines) to fund some or all of their projects. Usually they are combined with a hard money loan or something similar. In the best cases they have the cash to back them up.

I am curious what service you used for the 5% liquidation. We coach a handful of different ways to do it, usually <3%. 

I think it's a great approach as long as you do it the right way. Ideally you have the cash to back you up so you aren't a tight situation and you refinance before the promotional periods expire. Why not leverage bank money to put you in position to profit.