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?
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.
The Chase Slate is the best BT card but only in very narrow circumstances. It's only fee free in the first 60 days within new card membership and they are known for giving small starting limits on the Slate (they know the deal). If going for the Slate as a new card the best strategy is to have other Chase cards first such as Sapphire or Marriot or Freedom and then apply for the Slate and consolidate credit limits from your other Chase cards before you do a large BT. Every issuer is known to do BT offers, the ones who commonly offer the best combination of 0% interest and lowest transaction fee are Capital One and Discover and Barclays. I personally would not consider any offer with higher than a 2% fee as most fees aren't capped so if you are doing a 75k BT it will cost you $1500 at 2%, $2250 at 3%, $3000 at 4%, $3750 at 5%.
If you are comparing to other sources of funding you might consider this cheap, just have to run the numbers for your situation.
Depending on your credit profile maxing out (above 90% utilization) one card from a BT will hurt your Fico score but it will recover as you get it paid down. For maximum Fico score ahead of new apps - all credit cards to zero balance except for 1 card at 1% utilization yields the highest score. $2 is the minimum balance required to count as 1% any amount less than $2 counts as 0%
Investor · Harker Heights, TX · Member since 2015 · 76 posts · 34 votes
10y
Business vs Personal credit cards. Both are PG (personal guarantee)
Most business credit cards base approval criteria off of your personal credit. A good use of business cards is to use them for carrying balances as they don't report monthly to your personal credit, beware of the ones that do such as Cap1 Spark.
ALL business cards will report to your personal credit if you don't pay them.
Investor · Chicago, IL · Member since 2013 · 451 posts · 96 votes
10y
I have a merchant account with Square. It cost a little but I swipe my card - its financed as a purchase not a cash withdrawal with the card company and the cash hit my bank account for me to spend.
I'm no where near the $150k range and only use this method for emergencies so take this as just a suggestion for you to ponder. Do your math.
Business vs Personal credit cards. Both are PG (personal guarantee)
Most business credit cards base approval criteria off of your personal credit. A good use of business cards is to use them for carrying balances as they don't report monthly to your personal credit, beware of the ones that do such as Cap1 Spark.
ALL business cards will report to your personal credit if you don't pay them.
Exactly, the business cards report to Dun & Bradstreet, as opposed to Transunion or Equifax. You can't request checks from the credit cards, though; they are considered promotions and the marketing departments send them out. I get plenty of offers now that I don't really need them, but I'm stockpiling the checks just in case ;) They usually expire within 60 days though.
Investor · Crosby, TX · Member since 2014 · 124 posts · 72 votes
10y
I purchased a home using credit cards. I have a friend who has a small business and I just gave him my Cards and told him how much I wanted in each one. He just swiped them, charged me that amount and then wrote me a check from his account. It worked, no one ever said a thing about it, but not sure I would do it again.
Investor · Crosby, TX · Member since 2014 · 124 posts · 72 votes
10y
@Dan Hill yes it worked and it was a profitable deal for me, probably my best one to date. But, as I have grown in my investing strategies, i prefer funding with interest and terms that are locked in. CC companies are notorious for changing terms and conditions without letting you know. I am more comfortable with lending that I know the T's&C's wont change, even if it costs me a little more. Remember, Murphy is not just a friend, he's the law! I have heard of people buying a good deal, then before the rehab was finished the market changed and they were stuck with a loan with crazy terms for a long time. I guess if I had a few solid exit strategies as a back up i might be more comfortable, i dunno. Materials for the rehab, no big deal, i use credit cards all the time for that. Just my two cents.