Re: WLC? Good credit(750) - Posted by Ed Garcia
Posted by Ed Garcia on August 14, 2003 at 10:08:54:
Various credit lines
There are various types of credit lines. There is a Personal Credit Line aka Signature loan or line secured strictly by your signature and personal guarantee. This line is small in size but can be used for down payment or fix-up money. There is an Equity Line of credit aka HELOC (Home Equity Line Of Credit), and then there is a WLOC (Working Line Of Credit) big difference between an equity line, and a working line of credit.
An EQUITY LINE OF CREDIT is collateralized by a house or specific piece of real-estate. It?s size is RESTRICTED to the amount of equity you have in the house pledged for collateral. You can do what ever you want with the funds, NO RESTRICTIONS.
It?s primary advantage for an investor is to use it for down payment or fix-up money.
A WORKING LINE OF CREDIT, is a commercial LOC (line of credit) given usually
by a bank. This line is devised as working capital for a business.
A Working Line Of Credit is AWSOME…
(1) You can make CASH offers, allowing you more profit in your deal.
(2) You can CLOSE faster, making that extra deal, and more profit.
(3) You can SEASON your properties, by leaving them on your line for a while.
(4) You can use it to do FLIPS, where conventional financing is too expensive.
(5) It’s CHEAPER money, meaning you pay 1 or 2 over prime and no points
(6) You can make offers with more confidence, which is projected to the seller,
or Real-estate agent.
(7) There is NO LIMIT, as to how many deals you can do.
(8) It?s easier on your credit score because you can do multiple deals with out affecting your credit score.
If I own a furniture store, and I need inventory. A bank may lend me money to purchase furniture from the manufacture. I now stock the furniture for re-sale at a profit.
In our case, we purchase real-estate at below market or wholesale. We convince the bank, that our business runs just like the furniture store, and they provide us a working line of credit to purchase our inventory, which consists of real-estate.
In both cases the line is secured by the inventory. The bank will usually determine how much they think your line should be, based on past performance or track record. As you grow and do more business, your working line of credit can be increased.
A new investor would not be ready for a working line of credit. An experienced investor with a track record, could get a working line of credit, which would allow them from the sellers stand point, to pay cash. In making cash offers you can usually cut better deals.
Sorry to say Pete, but it?s not unusual for people to get confused when working with banks and going in and requesting a curtain line of credit, just to have the bank offer or give you what they have available, and try to get the borrower to accept it in lieu of their
I hope that this post has given you a little better understanding of some of the credit lines we as Real-estate investors would use.