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Line of credit and rental investments
Posted on 5/29/15 at 4:01 pm
Posted on 5/29/15 at 4:01 pm
Guys--I know there are many topics here for rental investments and I have a scenario I'd like you guys to look at.
My bank will give me a line of credit with a CD backing--I can do $100-$150K here.
I also have a $130K property--five acres with a four bedroom, two bath house, shop, 80/20 covered shed, beautiful land that I can purchase for $60K.
If I do this and own this property outright, bank will give me a credit line for $130K. I'll put renters in this property and take out a mortgage for $60K to get my money back on this property and rent it for $1,100 while paying $600 a month on the $60K mortgage.
With the credit line, I can walk in and purchase new rental property. Fix cosmetic issues, rent the property, go back to the bank, who will finance 75% of the appraised value, not the purchase price, and basically replenish my credit line.
Credit line is now back to $130K, go to next property and do the same thing and repeat.
What am I missing here? Are there better ways or better recommendations here?
My bank will give me a line of credit with a CD backing--I can do $100-$150K here.
I also have a $130K property--five acres with a four bedroom, two bath house, shop, 80/20 covered shed, beautiful land that I can purchase for $60K.
If I do this and own this property outright, bank will give me a credit line for $130K. I'll put renters in this property and take out a mortgage for $60K to get my money back on this property and rent it for $1,100 while paying $600 a month on the $60K mortgage.
With the credit line, I can walk in and purchase new rental property. Fix cosmetic issues, rent the property, go back to the bank, who will finance 75% of the appraised value, not the purchase price, and basically replenish my credit line.
Credit line is now back to $130K, go to next property and do the same thing and repeat.
What am I missing here? Are there better ways or better recommendations here?
2
Posted on 5/29/15 at 4:13 pm to JoseVargasTX
If your numbers are tight I think your strategy is very good! My credit line is about to run out so I am looking for new capital avenues myself. I've got about 80k in home equity but I am hesitant to leverage the roof over my head.
I like your rental numbers by the way. Will you be "all in" for 60K? Are you positive that is what it will rent for?
I like your rental numbers by the way. Will you be "all in" for 60K? Are you positive that is what it will rent for?
Posted on 5/29/15 at 4:45 pm to I Love Bama
You have the process correct!
Sometimes the fixups can eat into the LOC and you get several properties and the line it eaten up.
Go for it......
Sometimes the fixups can eat into the LOC and you get several properties and the line it eaten up.
Go for it......
Posted on 5/29/15 at 8:02 pm to JoseVargasTX
Just for the peanut gallery, as my financial acumen when talking about home financing is limited to basic types of financing I have experience with ie home mortgage and a refi.
Your bank gave you a personal line of credit for 130k which is secured by a CD you have with the bank, correct? What's the details on that CD, amount etc?
Just curious for educational purposes, thanks.
I understand the cash out refi after that.
Your bank gave you a personal line of credit for 130k which is secured by a CD you have with the bank, correct? What's the details on that CD, amount etc?
Just curious for educational purposes, thanks.
I understand the cash out refi after that.
This post was edited on 5/29/15 at 8:04 pm
Posted on 5/29/15 at 8:31 pm to I Love Bama
Yep. I don't use my home equity in my residence for my business matters. Off limits.
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