Purchase property with line of credit, then refinance?
CALLING OUT ALL SEASONED INVESTORS! 

I'm a newbie in the industry, didn't make an investment yet but I'm looking to pull the trigger on a property in the next year.

I don't fully understand how this particular method works.. There's this guy on YouTube "Tom Flip Anything USA" and he actively mentions in a lot of his videos that he's using "cash" in the form of a line of credit to purchase a property, then he refinance it, puts the money back into his line of credit, then he can use it again to buy another property and so on..

While I totally get that this is something I might not be able to do as a first time investor.. My question is, how do you even go about that? Where do you start? Is that even possible? Is there such a line a credit that is big enough to allow you to purchase hundreds of thousands or millions of dollars worth of real estate "cash", then refinance and go on with another purchase?
[{"id": "imv9jj1", "text": "When you own multiple commercial, or even SFH, properties, you can get larger lines of credit. \n\nHELOC is one form of line of credit that people use to get started in RE.", "replies": [], "depth": 1}, {"id": "imva2e4", "text": "Sure. A line of credit can be collateralized by stocks/bonds, art, and/or other real estate. Having this line makes you more nimble and able to bid \u201ccash\u201d. But yes, to get a line like this you need verifiable assets that would get this to roughly 70% LTV and a line lender would put a lien on them.", "replies": [], "depth": 1}, {"id": "imvabx6", "text": "The short answer is that if you have enough assets to pledge, you can get a loan. Then you could buy property. When real estate values are rising, you can buy at one price and do a cash-out finance or refinance and put that money into your next purchase. The key is that you have to have the assets to start doing this and you have to know and understand the market risk and calculate how much the interest on the loan (line of credit) will cost you, how much the value of the property will increase in what time period, compare that to how much you could make in alternative investments such as stocks or bonds, etc. \n\nIn other words, you have to have assets already, be highly knowledgeable in finance and the sector of real estate you want to buy in, know how to factor in all those variables and more to evaluate opportunities, and you have to be lucky. All your assumptions in your calculations are just that. They may be right or they may be wrong. If it was easy, everyone would be doing it. No one has a crystal ball. \n\nI don\u2019t know your situation, but when you venture into commercial real estate, you\u2019re up against very sophisticated private equity firms with full highly educated finance staffs, among other buyers, making these calculations. \n\nAnytime you read a book, watch a video, listen to a podcast, or attend a seminar, the presenter is making most of their money off those vehicles, not real estate.", "replies": [], "depth": 1}, {"id": "imvjwpy", "text": "I\u2019m confused how refinancing gets cash that allows you to pay off the line of credit?  Sounds intriguing and smart though.", "replies": [{"id": "imvltei", "text": "When you refinance a property with a bank, depending on how long you\u2019ve had the house and/or what kind of improvements have been done to it\u2026you then would be able to pull out the equity in the property and use it as cash to purchase or as a down payment for another property. This is known as \u201ccash out refi\u201d.", "replies": [{"id": "imvnkhw", "text": "I guess I get that part but then the mortgage/payment is typically bigger, right.  Would give max props if someone could do a simple example for me with some even numbers.  Let\u2019s say a $500,000 purchase with $100,000 line of credit down payment. Your looking at $2,200 mortgage payment on $400,000 principle and maybe $500 line of credit payments (again, ball parking off top of my head) for the $100,000 loan. What happens next in this scenario?  Does the equity you pull out go to pay down the $100k credit balance or does it go towards another property? Both? Help and thank you!!", "replies": [{"id": "imvx2n9", "text": "From my understanding, what I got from him, is say the property is 500k, his line of credit is 500k, takes the 500k from the line of credit as a \"cash\" payment to get the property. Once property is in his hands, he goes to the bank and refinances the 500k, bank puts 500k back into his line of credit..\n\nThat's how I got it and that's why I don't know if that's something that can literally be done that way, or he's just referring to it as a line of credit in that way, or it's a more complex system of real estate equity loans and so on..", "replies": [{"id": "imvye97", "text": "I\u2019m just trying to talk it through here, but if he uses his LOC to pay cash for $500k, then there is nothing to \u2018refinance\u2019 with the bank.  How does he get the cash out? I\u2019m so confused.", "replies": [{"id": "imvzck0", "text": "Force appreciation.  Buy \u201ccash\u201d &gt; increase noi &gt; stabilize &amp; cash out refi.", "replies": [], "depth": 6}, {"id": "imvzmog", "text": "I tried finding a video of his where he mentions something about it, but from I understood (and keep in mind I'm new at this) he has a credit line of 500k with Bank A, pays the property with the 500k line of credit, then goes to bank B to refinance, which in effect puts back the 500k into his credit line with bank A where he's ready to use it for another investment now.. Is that even possible?", "replies": [{"id": "imw059r", "text": "Not sure, I\u2019m new too, we need someone to spell this out like we\u2019re kindergartners.", "replies": [], "depth": 7}], "depth": 6}, {"id": "imwv5j4", "text": "You can only refinance and pay back the LOC if the property has appreciated. Otherwise there is no additional equity from the property to pay back the LOC. forced appreciation is one method but that usually takes a few years, not overnight.", "replies": [], "depth": 6}, {"id": "imxs9ek", "text": "I think maybe you hooked up on the word \u201crefinance\u201d and it\u2019s confuses you because there is no loan on the property to refinance.\nOnce he purchase the property he will go to the bank and get a loan using the property as a collateral - I.e. \u201crefinance\u201d", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "imvwfh1", "text": "Exactly my point, that's why I was interested how that works exactly, I thought it was just a way of saying it but the process itself is different or more complex. But yeah, the way he formulates it, is that he uses that as cash and once he refinances, he gets his \"cash\" back into his line of credit", "replies": [], "depth": 2}], "depth": 1}, {"id": "imvu507", "text": "LOC is like a credit card. You can tap it for short term liquidity and then pay it back with proceeds from permanent financing. Mortgages take a while to close and there\u2019s execution risk for the seller, so making an offer all cash allows the buyer to compete better. A LOC allows you to make cash offers because you\u2019ve already got the credit lined up ahead of time.\n\nMy firm has several series of $1B funds each with a LOC from a syndicate of banks. Our lines have $100M capacity so it gives us plenty of liquidity for this purpose. For new funds you can pledge uncalled capital commitments as collateral. \n\nVCs have been known to use lines to fund investments, then call capital from investors to pay off the lines shortly before IPO, which significantly juices the IRR and their promotes. Kinda shady but whatever.", "replies": [{"id": "imvxhus", "text": "I think this is pretty much the same thing I'm getting from it,.. It's the closest reply I got so far that seems to explain exactly what he's referring to in his videos as well (without mentioning how it works)", "replies": [], "depth": 2}], "depth": 1}, {"id": "imvvkxe", "text": "If you don't understand a YouTube video and post on Reddit to try to figure it out, you shouldn't invest.\n\nUnless you want my fantastic deal, which is much, much better.  I'll 10X your money in 40 days!", "replies": [{"id": "imvy346", "text": "Lol, sign me up! But no really, I was more curious of how it works.. Seemed from the beginning that it's not something I might be able to do initially.. Just trying to see what some of the seasoned guys think of it. If it's something that can be done if you have the necessary means for it", "replies": [{"id": "imvzeyt", "text": "It's a scam.  Either you're part of the scam and this is a fake account, or you don't understand commercial real estate.  No one will loan you money if it doesn't make sense.  60% LTV will be standard.  Unless you qualify for a Fannie loan, and then maybe you get 80%.  Either way you need to put money down.", "replies": [{"id": "imw09lt", "text": "I don't know man.. What I got from the other comments is that he may be using a LOC, which I also don't know exactly how it works.. But seems to be the closest explanation for what the guy is talking about", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "imvwaj2", "text": "Absolutely not", "replies": [], "depth": 1}, {"id": "imvwn2s", "text": "We do this all the time. Line of credit pledged with marketables. Refinance with CRE loan. LOC provides certainty of execution which puts you at the front of the line for a sale", "replies": [{"id": "imvycdi", "text": "I believe this is exactly what he does, your answer is the same as @neuropat and it kind of matches how he usually brings it up on his videos", "replies": [], "depth": 2}], "depth": 1}, {"id": "imy8pwx", "text": "Outside of qualifying for the 100k loan and 400k mortgage (debt to income, credit scores, current assets). If you purchase the home for $500k you need to be able to increase the value to get cash out from a refinance.  So if the renovated value would be, say, $750k, you can take a $500k loan, pay off the $400k mortgage and $100k loan.  But you have to leave 25-30% equity in the home as an investor. So your cash-out will depend on how much value can be added.  If you don\u2019t add value, you won\u2019t be able to get anything and you will have 2 loans for the full value of the propwrty", "replies": [], "depth": 1}, {"id": "imzuahr", "text": "This is best if you have enough in the line of credit to fully pay for the property all cash. Most lenders won\u2019t like you using the line as a down payment for the loan. The line gives you negotiating leverage by being able to close quicker than someone that\u2019s getting a loan. Then once you close, and if you did your due diligence correctly, you can collateralize the property and finance it (as long as it appraises).", "replies": [], "depth": 1}]