Credit Card Source of Funding

Real Estate Agent · Centreville, VA · Member since 2015 · 21 posts · 9 votes

OK. I have excellent credit ( 780 ) and numerous credit cards with a total credit availability around 150k. Question: how can I effectively use the credit available to me in my real estate investor business? Cash advances are expensive so I don't want to do that but how else can I take advantage of the credit cards?

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Chris Simmons

Real Estate Agent · Owasso, OK · Member since 2014 · 517 posts · 400 votes

10y

I am in the tail end of this as we speak. I have used the checks that get mailed to me and have paid fees anywhere from 1% to 3% to access the funds and in return get 0% for 12-19 months with interest only payments required.

This has allowed me to purchase a single family flip, 2 town houses and fund a new driveway for a duplex i recently bought.

Right now, I am sitting at about $120,000 in credit card debt but have 3 properties without liens because of it. I am almost done with the flip house and the two townhouses are rented and cashflowing.

I will sell the flip house and retire around $70,000 of the debt and let my remaining 9 rentals to take care of the rest in short order.

Then I can go to my commercial lender with 2 townhouses free and clear or close to it, collateralize those to free up additional funds to go buy more properties and releverage my credit cards again as needed when the cheap money offers come back my way.

For what it is worth, I have seen my credit drop from low 800's to upper 600's over the last several months, but this is just because of the new debt load. Once paid down, my score will rebound and then some. It's part of the process.

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Ned CareyPro Member
Moderator
Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
10y
You can use credit cards to purchase all your supplies and materials. You can also get cash advances then use balance transfers to move that to a lower cost card.
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Dan Hill
OP
Real Estate Agent · Centreville, VA · Member since 2015 · 21 posts · 9 votes
10y
Thanks Ned! Since I intend to add flipping to my repitoire the CC will come in handy after all. Using cash advances will be an option of last resort due to the fees and high interest rates. I want to keep things simple for now.
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Wells Lange
Indianapolis, IN · Member since 2015 · 125 posts · 50 votes
10y
I'm in a similar boat-- would financing a rehab be possible with credit cards? I mean as in paying contractors? I would think they would want a personal check... Do credit cards have checks that you can buy for them??
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JD MartinBusiness Member
Moderator
Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
10y
Don't use a cash advance, use a balance transfer check. I have done this before to have quick access to cash to close a cash deal for a relatively low fee. Most cards will do balance transfer checks to anyone right over the phone if you have a current promotion, and all of my cards are always running promotions at any one time. Caveat: be prepared to either pay off the balance in full before the grace period or move the money somewhere else before your interest rate kicks in.
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JD MartinBusiness Member
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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
10y
Originally posted by @Wells Lange:

I'm in a similar boat-- would financing a rehab be possible with credit cards? I mean as in paying contractors? I would think they would want a personal check... Do credit cards have checks that you can buy for them??
Do a balance transfer to yourself with a check for the amount of cash you'll need to finance the job, deposit the check in your bank and then pay the contractors from there.
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Wells Lange
Indianapolis, IN · Member since 2015 · 125 posts · 50 votes
10y
thanks for the response--can you give an example? I'm having trouble picturing what you're saying
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Franklin Romine
Visalia-Fresno, CA · Member since 2009 · 1k+ posts · 863 votes
10y
@Dan Hill
With that much given and available credit I'm assuming you have a couple hundred K cash in the bank?

Frank
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Jerry Bruckenheimer
Investor · Harker Heights, TX · Member since 2015 · 76 posts · 34 votes
10y
Dont do a balance transfer and don't use balance transfer checks, why not do it for free AND earn cashback or points on your credit card?
For anyone interested I own a Credit forum (not here to advertise in the forum so PM me for link if you want)
You can fund a new CitiGold Checking account for up to $100k with certain credit cards, doesn't count as cash advance and points/miles/cashback is earned. In addition you can earn 50k points as a bonus directly from Citi just for opening of the account. Then pay whomever you choose (including the credit card you made the charge on) from the checking account.
NOTE: There are steps to this and only certain credit cards work in avoiding cash advance fees. Don't jump wildly into this.
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JD MartinBusiness Member
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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
10y
Originally posted by @Wells Lange:

thanks for the response--can you give an example? I'm having trouble picturing what you're saying
Call your CC company and ask them what balance transfer offers they have and ask them to send you a check packet. Make the check out to yourself, deposit it in the bank.
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Wells Lange
Indianapolis, IN · Member since 2015 · 125 posts · 50 votes
10y
ok thanks!
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JD MartinBusiness Member
Moderator
Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
10y
Originally posted by @Jerry Bruckenheimer:

Dont do a balance transfer and don't use balance transfer checks, why not do it for free AND earn cashback or points on your credit card?
For anyone interested I own a Credit forum (not here to advertise in the forum so PM me for link if you want)
You can fund a new CitiGold Checking account for up to $100k with certain credit cards, doesn't count as cash advance and points/miles/cashback is earned. In addition you can earn 50k points as a bonus directly from Citi just for opening of the account. Then pay whomever you choose (including the credit card you made the charge on) from the checking account.
NOTE: There are steps to this and only certain credit cards work in avoiding cash advance fees. Don't jump wildly into this.
This only works if you're going to pay the balance off in full. Otherwise, the paltry cash back you get is a joke compared to the interest rate you'll carry on the balance. Most balance transfer offers on good cards will give you 12-24 months, 0% interest, 2-4% transaction fee. In essence, the poster gets to carry the cost of a rehab over that period of time for just a percent or two of effective interest. If he/she had cash to fund the rehab in the first place, why would they be looking to fund it with credit cards? Surely everyone these days knows that you can use a cash back card and pay it off in full every month to get a few bucks back. My impression is that the poster needs access to cash to fund the rehab or purchase.
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Account Closed
Real Estate Agent · Richardson, TX · Member since 2014 · 511 posts · 161 votes
10y
That's what I'm doing for my current rehab. I did a cash advance to purchase the property. Then I wrote a 0 % convenience check to my account. I paid the cash advance balance with those funds so I wouldn't get charged interest. Most of my Credit cards are 0 % interest. You can buy materials with your CC and some subs will take Credit cards as well but they will charge a fee.
You can also use Paypal and Square. Transaction fee for square is only 2.5 % only which might seem expensive for some people but it's nothing compared to a hard money lender. If you choose this method, I'd probably talk to a friend or relative and ask them if they can linked the square account to their checking accounts. If you pay yourself through Square or paypal, they can terminate your account.
@Dan Hill
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Account Closed
Real Estate Agent · Richardson, TX · Member since 2014 · 511 posts · 161 votes
10y
Also, keep in mind that those "high" rates are usually low compared to Hard money lenders. Most HML will charge about 10 % of your total loan amount (Usually between 12-14 % and 2-4 points). So if you're pulling an 80K loan, you pay about 8,000 on interest and points. With your credit cards, you will pay interest only and since you're not buying all your materials upfront, you will only be paying interest on partial amount of your rehab costs. In other words, you can time your project efficiently and get away with not paying too much interest as you would do with a HML.
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Jerry Bruckenheimer
Investor · Harker Heights, TX · Member since 2015 · 76 posts · 34 votes
10y
Originally posted by @JD Martin:

Originally posted by @Jerry Bruckenheimer:
Dont do a balance transfer and don't use balance transfer checks, why not do it for free AND earn cashback or points on your credit card?
For anyone interested I own a Credit forum (not here to advertise in the forum so PM me for link if you want)
You can fund a new CitiGold Checking account for up to $100k with certain credit cards, doesn't count as cash advance and points/miles/cashback is earned. In addition you can earn 50k points as a bonus directly from Citi just for opening of the account. Then pay whomever you choose (including the credit card you made the charge on) from the checking account.
NOTE: There are steps to this and only certain credit cards work in avoiding cash advance fees. Don't jump wildly into this.
This only works if you're going to pay the balance off in full. Otherwise, the paltry cash back you get is a joke compared to the interest rate you'll carry on the balance. Most balance transfer offers on good cards will give you 12-24 months, 0% interest, 2-4% transaction fee. In essence, the poster gets to carry the cost of a rehab over that period of time for just a percent or two of effective interest. If he/she had cash to fund the rehab in the first place, why would they be looking to fund it with credit cards? Surely everyone these days knows that you can use a cash back card and pay it off in full every month to get a few bucks back. My impression is that the poster needs access to cash to fund the rehab or purchase.
Lol paltry! I've collected 500,000 AA miles off of this.
Positive money versus a negative of transfer fees at 2-4% on the same amount equates to a paltry $10,000 to $20,000 in balance transfer fees. Not to mention an extreme hit to Fico for max utilization on those cards for carrying the balance.
Not here to argue, to each his own, enjoy.
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Ned CareyPro Member
Moderator
Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
10y
Originally posted by @Wells Lange:

I'm in a similar boat-- would financing a rehab be possible with credit cards? I mean as in paying contractors? I would think they would want a personal check... Do credit cards have checks that you can buy for them??
My guess is most smaller contractors would not take credit cards but you can tie a credit card to a pay pal account. I pay one of my contractors that way. Often credit cards will send low interest checks to use.
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Mindy JensenPro Member
BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
10y
I have funded several flips using the store credit card at Lowe's and Home Depot. For purchases larger than $200 (or $299, I can't remember now) you can have no interest for 12 months. Larger purchases have larger no-interest periods, up to 24 months. By that time, you should have sold the house and you can pay off the cards.
***NOTE: This is a NO-Interest deal, not a no-payment deal. You still have to make the minimum payment or interest is charged on the whole amount you initially charged. If you don't pay it off during the promotional period, you will be charged interest for the entire time and the entire amount you initially charged. This only works if you make timely payments and can pay it off in full before the promotional period ends.
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Chris Simmons
Real Estate Agent · Owasso, OK · Member since 2014 · 517 posts · 400 votes
10y
I am in the tail end of this as we speak. I have used the checks that get mailed to me and have paid fees anywhere from 1% to 3% to access the funds and in return get 0% for 12-19 months with interest only payments required.
This has allowed me to purchase a single family flip, 2 town houses and fund a new driveway for a duplex i recently bought.
Right now, I am sitting at about $120,000 in credit card debt but have 3 properties without liens because of it. I am almost done with the flip house and the two townhouses are rented and cashflowing.
I will sell the flip house and retire around $70,000 of the debt and let my remaining 9 rentals to take care of the rest in short order.
Then I can go to my commercial lender with 2 townhouses free and clear or close to it, collateralize those to free up additional funds to go buy more properties and releverage my credit cards again as needed when the cheap money offers come back my way.
For what it is worth, I have seen my credit drop from low 800's to upper 600's over the last several months, but this is just because of the new debt load. Once paid down, my score will rebound and then some. It's part of the process.
6 Reply
Dan Hill
OP
Real Estate Agent · Centreville, VA · Member since 2015 · 21 posts · 9 votes
10y
@Chris Simmons thanks a ton! That's what the original post was about. You are using CC to fund the purchase of property so what are the mechanics? Do you write a balance transfer check to yourself and deposit the money in your checking account ala Jd Martin? If so, how long does it take to get the money transferred?
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JD MartinBusiness Member
Moderator
Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
10y
Originally posted by @Dan Hill:

@Chris Simmons thanks a ton! That's what the original post was about. You are using CC to fund the purchase of property so what are the mechanics? Do you write a balance transfer check to yourself and deposit the money in your checking account ala Jd Martin? If so, how long does it take to get the money transferred?
The availability of funds is only limited to your bank's policies. My bank allows access to funds same day if deposited before 2 PM. This assumes that you have the credit limit in place to write the check from the CC account. If you go this route don't forget to leave room for the transaction fee, i.e. if you want to get $20k, and the transaction fee is 3%, you will have a balance of $20,600 on your CC, so if your credit limit is 20k it will bounce. You have to write it for $19k and change.
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Dan Hill
OP
Real Estate Agent · Centreville, VA · Member since 2015 · 21 posts · 9 votes
10y
Got it. Thanks @Jd Martin !
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David Rundle
Engineer · Oklahoma City, OK · Member since 2013 · 144 posts · 44 votes
10y
I was going to buy my last house with a southwest card, but couldn't figure out how to go to title with credit card funds and ended up paying cash. Could someone clarify how you get certified funds this way?
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Jerry Bruckenheimer
Investor · Harker Heights, TX · Member since 2015 · 76 posts · 34 votes
10y
Originally posted by @David Rundle:

I was going to buy my last house with a southwest card, but couldn't figure out how to go to title with credit card funds and ended up paying cash. Could someone clarify how you get certified funds this way?
If you use a balance transfer check, deposit it in to your checking account and then withdraw from checking account in the form of a cashiers check. Expect a delay until your BT check deposit clears.
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Chris Simmons
Real Estate Agent · Owasso, OK · Member since 2014 · 517 posts · 400 votes
10y
The only way you will get certified funds is to take the convenience checks they mail you, write a check to yourself and let it clear as per the policy of the bank you are depositing the funds into. I commonly have to wait 5 business days. After that, assuming the check you deposited did not bounce or there were any further holds placed on your account, that your money in the bank. Simply go to them, fill out a withdrawal slip and ask for a cashiers check payable to whatever entity you need.
Obviously, you need to plan in advance for this. And no, you don't get points or miles for cash advances like this.
I do this when I have big purchases coming up and am comfortable with this tactic vs other, more expensive sources of capital. Additionally, I will use rewards cards to purchase materials, pay any vendors I can etc. When those cards are used up, I balance transfer those to a card with 0% for a period of time. That way, I get 0% interest rate loans (yes, I pay 1-3% for balance transfer fee), for both purchase and rehab.
The main point of this is to be very comfortable with your exit strategies....just like you would with a hard money lender. Make sure you can either pay down the debt before the intro period expires...either by selling the property or refinancing it or using rental income from that and other properties....whatever works for you. You don't want this getting strung out when the interest goes to 15+% after the intro period is over.
And get as many cards as possible with as high of limits as possible. I have used less than 50% of my available credit and thus my credit score has not been impacted as bad. You max out the only one or two cards you have and your score will tank. This is all temporary so don't panic if it does happen, but if you are looking to refi with a traditional mortgage or use credit where your score is important any time soon, you better account for this.
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Chris K.Pro Member
Investor · Baltimore, MD · Member since 2012 · 1k+ posts · 655 votes
10y
I constantly use the balance transfer checks and have used one to purchase and renovate a house. Every month or so they'll send me an offer to 0% for 8-9 months. There's usually a fee to borrow but the max is $75, so borrowing $10,000 for 8-9 months for $75 is well worth it to me. If I have a balance at the end of the promo I'll pay it off then repeat if it makes sense.
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John D.
Rental Property Investor · La Quinta, CA · Member since 2014 · 1k+ posts · 779 votes
10y
I'm curious what cards you recommend for these balance transfer checks. Some quick internet research turned up the Chase Slate card, but upon further investigation it seems they are backing out of some of their balance transfer promises, at least for new card holders. Would you mind sharing what cards you recommend? I'm 725 credit score, no credit card debt.
Most of the money I am borrowing is at 3% (interest only floating against a stock portfolio, mostly tapped out) around 4-5% ( mortgages, have one property left that will be easy to do a cash-out refi on) and 8-9% (private money secured to some of my more non-conventional real estate assets).
Any time I see a new source of capital at less then 10% interest, I'm confident I can get cash-on-cash returns of 2-3x that, and am therefore interested.
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