I want to start buying rental properties. I was approved for a mortgate loan but was also told I should just

Asked by Amy, 60103 Fri Mar 7, 2008

use a line of credit to buy properties. Can someone explain the pros and cons of purchasing with lines of credit and not individual mortgages on each rental. Thanks

Help the community by answering this question:

+ web reference
Web reference:


Ntfeldman, , Tampa, FL
Fri Mar 7, 2008
Hi Johnathan, Love Kansas City!

Well with a line of credit, it's like having a credit card with a predetermined available balance. Ready, aim, sign. You don't have to go through the "wait and see" approval portion of the process of purchasing with an individual loan (these loans qualify the borrower AND the property, a LOC just qualifies you and you qualify the property. Greater control, greater responsibility.

You can actually do both though, if you want. You can use the line of credit to increase your down payment or to buy down the primary lender's exposure to get a better rate. Read the loan/LOC docs but if it's descretionary then you might be able to use the funds for closing costs etc.

Your note says "rental" properites so I'm going to assume your a buy and hold not a buy and flip strategy. If you're a buy and flip guy, a LOC is great because you can essentially pay "borrowed cash" for a property and negotiate that way - keeps your closing costs way down to get in and out of a property. If you're a buy and hold (5+/- years) strategy then you won't feel the same level of hit on the getting in costs.

You can get the same qualifying guidelines for up to 4 dwelling units under roof and there are effeciencies in volume. I'm going to suggest you hunt for duplexes, tri's and quads.

Hope this helps.

Good luck, have fun and make money!
Web Reference:  http://www.EisnerFeldman.com
0 votes
Search Advice
Ask our community a question

Email me when…

Learn more