Line of Credit

Line of Credit

Line of Credit

 

Hi everyone. Third round of posts that give you value… 2/3

So today in a post that gives you value we will talk about a line of credit, and in particular about a line of credit in our activity in investment real estate.

So the credit line basically is called in English

Line of Credit (LOC)

Wait, I know this name when it comes to business activity at the bank, what does it have to do with the real estate investments I make?

A line of credit (LOC) is an arrangement between an institutional body - usually a bank - and a customer that determines the maximum loan amount the customer can borrow. The borrower can withdraw funds from the line of credit at any time as long as they do not exceed the maximum amount (or credit line) stipulated in the agreement and also meet all other requirements such as making minimum payments on time

Credit line allows flexibility, which is its main advantage. Borrowers can request a certain amount, but they should not use any of it. Instead, they can adjust their spending on their LOC needs, and therefore will pay interest only on the amount drawn, not on any credit line.

In addition, borrowers can adjust their repayment amounts as needed, based on their budget or cash flow. They can repay, for example, the balance of the entire debt at once or simply make the minimum monthly payments.

A credit line is a type of revolving account, also known as an open credit account. This arrangement allows borrowers to spend the money, repay it and spend it again in an almost never-ending revolving cycle. Revolving accounts such as credit lines and credit cards are fundamentally different from installment loans such as mortgages, car loans and loan signatures.

In installment loans, also known as closed credit accounts, borrowers repay a fixed amount of money and repay it in equal monthly payments (often) until the end of the loan.
After the loan ended the borrowers could not waste those funds again.

In the world of real estate, you can get a line of credit against real estate (HELOC),
home equity line of credit.

Lines of credit without collateral tend to come with higher interest rates than those with collateral.
They are also more difficult to obtain and often require higher credit review.

There are lines of credit that allow you to write checks while others include a type of debit card or debit card.

When there is collateral of an asset / group of assets on a line of credit, they are taken according to the market value of the asset / group of assets, less liabilities that they have. The credit line will usually be at the rate of 75% or 80% of the net asset value (personal note - for some time now banks have begun to tighten the belt on the subject and credit lines today tend towards a rate of 50% of the collateral value).

Credit lines often have a long validity of several years (part up to 10 years) during which the borrower can withdraw available funds, repay them and borrow again.

However, borrowers should be aware of potential problems when taking the credit line.

Uninsured credit lines have higher interest rates.

• Interest rates (APR) for credit lines are almost always at variable interest rates (ie, variable whenever there are changes in interest rates in the market / market), and there is variance between
The various credit sources.

• Credit lines do not provide the same regulatory protection as credit cards. The penalties for late payments are severe

• An open line of credit can lead to overspending,

Leading to an inability to make payments.

• Misuse of a credit line may harm the borrower's credit score (if he has)

End point - a line of credit is not given on a single house but on a large property or group of properties or a large market value, and of course it is desirable to have them under the same LLC

An idea I came up with for a real estate company owner who has a lot of clients and homes that he manages, is to look into the possibility of connecting several investors together… Investors with multiple assets and who see the long term in creating a return and value for their investment ..
And bundle everything under the same llc and then connect with someone I work with (and want at the event) to build financing and a line of credit against the assets.
This give huge value for customers and customer group
This attachment may have been removed or the person who shared it may not have permission to share it with you.

Link to the original post in the United States Real Estate Forum on Facebook - Works on a desktop computer (To view the post must be members approved for the forum):
http://bit.ly/2GES30O

The original responses to the post can be read at the bottom of the current post page on the site or in the link to a post on Facebook and of course you are invited to join the discussion

 

Related News Real Estate Entrepreneurs

Responses

  1. Ido Post is great .. just fun.
    I would add a point that the interest rate varies according to the interest rate changes in the economy, for example I got a credit line of $ 800,000 and from it I used $ 500,000 for purchases, when there is a change in the interest rate the interest rate will change on the money I took and also the $ 300,000 I have not taken yet Variable interest loan…
    In any case, I will post a post ..