Using a line of credit to buy real estate.
What's going on YouTube. It's Matt Faircloth. Thank you for watching Mentorship Monday.
My name is Matt. My company is called the DeRosa Group. And if you guys have not seen
us before, the DeRosa Group is a real estate investment company. We offer up all kinds
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Today's question comes from Bennett. Thank you, Bennett for your question. Bennett wants
to know, "Hey there, my name is Bennet and I'm looking forward to acquiring real estate
using a line of credit to use to pay on the down payment on an apartment building. How
would I go about doing that? Thank you for your time." Well, I'll give you my best here
Bennett. So what Bennett may be looking for is an unsecured line of credit, which is pretty
much like a loan, but it's not secured by any real estate or anything like that. It's
just a loan. Maybe Bennett's got good enough credit that he can obtain something like that,
right?
So the way to go about obtaining an unsecured line of credit... I've got a few videos on
my YouTube channel you guys can search for. I've got one on buying real estate with a
credit card, you can look at that. And there's one on obtaining unsecured lines of credit,
that's all there. But what you're looking to do Bennett is that's one way you can do
it and watch those videos. But I'll also tell you briefly. You can get low interest or 0%
interest credit cards, take a cash advance and use that to buy the apartment building.
Or you can go and get an unsecured line of credit, which is pretty much a credit card
too, but a bank will give it to you if you've got really good credit. A bank will give you
up to 50K normally in an unsecured line of credit.
The problem you have Bennett is that there's no collateral to pay that back. And aside
from just paying it back out of cashflow on the property. If it's a big enough property,
it could pay back pretty quick. If it's a small property or if it doesn't cashflow right
away, even if it's a big property, you may be holding that line of credit out there for
a long time. The 0% interest credit card will turn into an 18% interest credit card very
quickly. The $50,000 line of credit from a bank can get called due at any time. They
can come up and say, "You know what? We decided we don't want you to have that 50K anymore.
We're going to rake it back from you." Right?
So these things are not stable. And so I don't recommend you buying longterm real estate
using those vehicles. If you have other real estate, you can get a secured line of credit
Bennett and that's just a... A home equity line of credit, it's the easiest example of
such. [inaudible 00:02:51] be that would on your home an equity line of credit on your
house, like a second mortgage on your home that you would get. Not a second mortgage,
a HELOC on your home that you could use to buy rental real estate. If you have other
pieces of property, not your home, you could put a HELOC on those. Those are all simple
ways to do it.
My guess is Bennett, if you owned a home that had a ton of equity, you might not be asking
this question. But for those of you guys watching, if you own your home and have quite a bit
of equity in your house, you should have a home equity line of credit on your house.
And you could untap that line and use it whenever you need to. Let's see. Other resources to
offer you Bennett, because my guess is you don't have access to this kind of stuff. And
it's okay you don't, but I'll give you some more ideas.
Perhaps find somebody in your network that owns a home free and clear and see if they're
willing to take that home and make that collateral for a loan that you take out. And then that
home is collateral. It'll get a longterm home equity line of credit, a monthly payment plan
on it. And they're not going to adjust or call the loan back anytime soon, because it's
got real estate collateral to it. The rate will probably be flexible. It will probably
float up and down, but it's not going to be egregious. And it's also not going to get
recalled back anytime soon because they've got collateral like I said. So find somebody
in your network that has something like that.
The only other options Bennett are going to be extremely expensive, like hard money and
stuff like that. But hard money lenders are typically going to want collateral too. So
those are your choices I believe is an interest only credit card, but that's a little hand
grenade that turns into a bomb eventually because it's going to turn into an 18% interest
card very quickly. A signature loan, which is a line of credit you can get from a bank,
an unsecured line of credit. Not the best idea because they can change the terms on
that pretty quick.
Those two items by the way, are really good for fixing flips or doing the BRRRR strategy.
So if you guys are looking to buy properties, renovate them, rent them out, refinance them,
repeat. Doing it over and over and over again. 0% interest credit cards or signature loans
are really, really good ways to get those things moving. So your answer Bennett, perhaps
somebody in your network, that's got some real estate free and clear, or if you happen
to have some real estate, just simply go get an equity line on it and that would enable
you to do that down payment on an apartment building like you want to do. Thank you Bennett.
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up to here at the DeRosa Group by subscribing to the channel. Thank you for watching. Thank
you Bennett for your question again. Have a great profitable week.