I am a bank credit officer and the biggest request I get from investors isn’t to buy notes…it’s getting lines of credit for their note and/or real estate business.
If you are a BiggerPockets reader you know there are tons of great note deals out there. However, your absolute profit is limited to your personal and/or company’s capital.
Getting a line of credit for your note and real estate business can offer you a competitive advantage for these reasons:
- Positive carry – interest cost on the line of credit is lower than the interest earned on your notes
- Timing – buy notes faster because you have a line of credit already approved
- Bulk purchase – you can negotiate a steep-discount if you buy a portfolio of notes
Two Tips for Getting a Line of Credit Approved
Now that we’ve gone over the competitive advantage you can have by having a line of credit, how do you get a line of credit for your note business?
Let me start by saying that this is not easy. You probably know from dealing with banks that getting a simple loan isn’t easy. Getting a line of credit for your note business is even harder. However, I believe it’s worth it due to the competitive advantages it offers your businesses as outlined above.
There are two primary things you need to outline to your banker to negotiate a line of credit:
- Cash-flow – hopefully you can cash-flow the line of credit in multiple ways (existing notes, salary, rent, etc), and not completely dependent on the notes you are buying to pay the monthly payments.
- Collateral – carefully outline all of the …read more