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7 Novel Ways to Use Credit Cards for Real Estate Investing

Expertise: Landlording & Rental Properties, Real Estate News & Commentary, Personal Finance, Real Estate Investing Basics
115 Articles Written

Who doesn’t like credit card rewards?

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For that matter, who hasn’t dreamed of swiping their next real estate investment on their credit card?

While title companies sadly don't accept credit cards, there are still ways to use your credit cards to pull cash for real estate investments. A quick word to the wise, though: These techniques may not actually cost less than more traditional loan sources. Not only are credit cards usually expensive, they come with their own risks, from immediate cancellation to debt spiraling and a cut financial safety net.

Swim at your own risk!

1. Use the prepaid debit card/money order trick.

This has been floating around the Internet for a few years now and still seems to work. At a retail store, you buy a prepaid debit card along with your groceries and put the entire purchase on your credit card. You then use the prepaid debit card to pay for a money order… made out to yourself. You deposit it at your bank, and voila! You have cash, where before you had plastic.

Of course, the prepaid debit card itself might include a small fee, and the money order will probably cost $1 or so. But if you can find prepaid debit cards with high enough balances, it may be worth the trouble.

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2. Load up on PayPal “My Cash” cards.

Heard of these? A variation on the tactic above, they’re reloadable debit cards linked to your PayPal account. You buy them at retail stores and load money onto them, and that money then transfers to your PayPal account.

There are limits, of course. Each card can only be loaded with up to $500 at a time, and there’s a monthly maximum of $4,000. Each card also costs $3.95.

Still, it’s a useful and cheap way to move $4,000 from your credit card to your PayPal account (and from there, to your checking account) each and every month.

3. Pay directly for materials when renovating.

It's amazing more real estate investors don't do this. To begin with, many contractors pad their materials estimates, so paying for labor only will save money immediately. After a contractor gives you a quote for a renovation job, tell them you'll pay them for labor but will pay for the materials yourself.

Ideally, go with the contractor to the supplier to keep an eye on what materials you're paying for. If you have 100 percent trust in the contractor, the cashier can simply call you when the contractor is at checkout, and you can give the cashier your credit card information.

Related: Planning to Pay Taxes With Your Credit Card? Stop! And Read This.

Remember to always collect receipts from the contractor, to check the materials purchased, and to keep the receipts for tax season.

4. Use contractors who accept credit cards.

Some contractors do, for a fee (usually in the 3-3.5% range). It can make sense to do if you’re short on cash for the renovation project or if your mortgage lender is willing to lend money for the purchase but not for additional renovations.

Just be sure to have several contingency plans in place to pay this money back to the credit card company. Quickly.

5. Actually use those convenience checks.

Many credit card companies periodically mail cardholders a few “convenience checks,” which are checks paid from the credit card balance. They come with fees, but sometimes these fees are mitigated by 0% interest for an introductory period. If the up-front fee is only 3-4%, it may be worth swallowing that fee in exchange for no interest payments due for the next year.

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6. Stockpile cash and credit card debt, then balance transfer to 0% APR.

You may not be able to put your real estate purchase on your credit card, but you can put nearly every other expense on your credit card and stockpile cash for a few months. The problem with this method is that you rack up a bunch of expensive credit card debt.

Fortunately, credit card companies offer enticing introductory 0% APR periods to persuade you to sign up. Once you’ve stockpiled the cash you need, open a new credit card with a long introductory 0% APR period for balance transfers. Then it’s simply a matter of transferring your credit card balance to the new card, where you won’t have to make interest payments for up to 15 months.

7. Consider just eating the cash advance fees.

Credit card companies typically charge 3-5% for cash advances, which is no picnic to pay. But mortgage lenders charge their own nasty fees, from junk fees like a $495 "processing fee" to lender points. Conventional mortgage lenders also take 30-60 days to close, regardless of what the 24-year-old loan officer promises. Credit card cash advances are instantaneous.

And hard money? Most hard money lenders charge just as much in points as the credit card does, plus junk fees to boot.

If you're buying an $80,000 property and have three $30,000 credit cards, it will probably be faster and may even be cheaper to use a credit card cash advance than a hard money lender. At least you'll get some of the cash advance fee back in the form of reward points.

Related: How to Be Smart About Credit Card Debt When You Have Student Loans

Credit cards are dangerous tools, but they can still be powerful when wielded effectively. Because they serve as a backup source of funds for most of us, it’s doubly important to be careful not to overextend on debts and to have another emergency backup available. Real estate investors also need both a primary and at least one contingency exit plan for paying these debts back quickly.

Happy swiping!

Ever used credit cards in your real estate investing? Want to tell us juicy details about the vacation you want on after your last house flip, paid for entirely by credit card rewards?

Well, probably not, but we’d love to hear your experiences and thoughts anyway!

G. Brian Davis is a landlord, personal finance expert, and financial independence/retire early (FIRE) enthusiast whose mission is to help everyday people create enough rental income to cover their living expenses. Through his company at SparkRental.com, he offers free rental tools such as a rental income calculator, free landlord software (including a free online rental application and tenant screening), and a free masterclasses on how to reach financial independence within 5 years.

    Soddee R. Knight Investor from Oklahoma City, OK
    Replied about 1 month ago
    Very informative article! We've used cash advances to repay some of our private money lenders after a rehab when the cash out refi took longer than expected. Once the cash out refi was completed we paid the credit card company back. The credit card debt can be very useful when used strategically.
    G. Brian Davis from Baltimore, MD
    Replied about 1 month ago
    Absolutely Soddee! Just because many people abuse credit cards doesn't mean they aren't useful tools!