Real Estate Agent · Richardson, TX · Member since 2014 · 511 posts · 161 votes
I've read a few blogs regarding using credit cards to fix and flip properties. I have two main concerns and I was hoping could give me some advice:
1. Credit score: How does a cash advance impact your credit score? Let's say you have a credit line for 10,000 and decide to do a cash advance for the full 10,000. Wouldn't that impact your credit score since your debt/credit ratio is 100 %?
2. Cash Advance fees. So far I've seen cards that charge 3-5 % as fees for the cash advance. Has anyone be able to negotiate these terms? 5 % seems a bit too high.
Madison Heights, MI · Member since 2014 · 471 posts · 132 votes
11y
The decrease in FICO from maxing a credit card is only temporary. OTOH, the more you push the limits of your cards, the more likely the banks are to increase your limits..
Wholesaler · Salt Lake City, UT · Member since 2009 · 1k+ posts · 401 votes
11y
Just think of them as hard money lenders that you can do business with immediately.
That is why I call so many of the deals I see here on properties you can pick up as credit card deals . I was on a vacation and the waitress was telling the other waitress about a house she wanted to buy but couldn't put together. She was getting off shift so my wife and I joined her and we went to the property. It needed work but nothing like a sinkhole, the seller was motivated, The seller said he would sell at even a much lower price if he could get the money in 3 days. The waitress and her husband gave me a price they would pay me, we made a deal, checked out the house and ownership, etc, took the seller to the escrow and got title and paid with a cash advance on my credit card. As a matter of fact didn't need the advance the title company just ran a charge through, never had that happen before or since.
I was used to dealing in the S.F.Bay Area and was amazed at how many of these deals were available. It looked like you could do a couple a week without to much effort.
On our way back we stopped to eat at the same place and the waitress was on. I said have your husband give me a call in about a week. He did and a wholesaler/rehab team was born.
I bought sub2 deals too and financed the repairs with credit cards and sold retail. In the early years it was very useful to have a wallet full of credit cards. or as I said instant hard money.
Real Estate Agent · Richardson, TX · Member since 2014 · 511 posts · 161 votes
11y
Thanks for sharing @Brian P. , what an amazing story.
I think it all comes down to risk tolerance and knowing what you're doing. I guess if you compare it to hard money lending , it might be even a better deal considering you're being charges 3-5 points when using a card and a hard lender might charge you points as well plus a very high interest rate.
If I might ask, What was the impact in your credit? I've heard that if you use a high percentage of your available credit (above 70%) it can affect your credit score. I'm not sure if that's true or not.
Investor · Hampton Roads, VA · Member since 2014 · 1k+ posts · 418 votes
11y
Lol ok. I don't come on here looking to argue but to share an opinion. I think your investing strategy of buying and refinancing is really smart. Use credit cards if you want. There is nothing wrong with that. Most people aren't responsible enough to do that and get in bad situations. I can do it, but choose not too. If that makes me a court jester that's fine.
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
11y
@Bryan N. LOL. Sorry, I think you took that wrong. I wasn't calling you a Court Jester. I was actually agreeing with you. What I meant was, you're correct in that if it isn't right for you, don't do it. The Court Jester remark was a joke, meant to describe the results...not the person. Sorry if that came out wrong.
Fair enough. Sometimes things get lost in translation on the web. I did ask my wife to order the jester hat on Amazon so I can show properties with it on :)
Involved In Real Estate · Winston-Salem, NC · Member since 2013 · 277 posts · 188 votes
11y
@Account Closed To give you an idea of credit score impact...I recently pulled $24K off a $25K credit card, and $24K off a $25K personal line of credit. It took two months for my FICO to catch up, but it dropped 46 points. I had timed it so that by the time FICO caught up I would have completed a cash out refi and paid off the credit lines. Unfortunately the deal fell through, so I paid back the credit lines. Waiting to see what my FICO will be once it catches up again.
Wholesaler · Salt Lake City, UT · Member since 2009 · 1k+ posts · 401 votes
11y
Daniel
Never worried about credit score. In my early years there wasn't anything like fico. As a matter of fact my brother and I used to buy properties at tax sales and other places that had a future or value on our list of assets for the bank to review. And many of those turned into great deals. Two I really liked, one was a parcel we bid on because our pockets were full of poker winnings from the night before. and I knew from the assessors parcel number it was in a great area. The other was also a good area. We knew nothing about them at all just bought them blind for the asset sheet.
On the first one we went and picked up our wives to take to lunch and then look at what we bought after we got a plat map first for both properties. Great lunch got to the street we wanted and on on side brand new luxury homes, on the other vacant lots with great views. We looked at the plat map and figured out the problem. shortly after these people had bought their dream house lots the county had changed the zoning from 3/4 acre to 1 acre and they couldn't get building permits. The parcel of wasteland we bought ran above these lots. We gave these owners what they needed, buying enough land from us to make their lots build able. Grand slam !!!
Nest step parcel 2, drove up to look at it . Bad news, basically a big gully with great views. We look up the street and they are just starting a new home development. The first loads of dirt are being hauled away. We go up there and the developer is there and we suggest he save some money and dump the dirt on our site. He likes the idea, we prove we own it, and we now have a very large dirt filled gully being constantly firmed up. We figure we can build 4 new home on pilings down to bedrock.
We check out the adjoining parcel and discover it is very large and the only way to access it is by a very bad and long narrow county road of many miles on the other side. We offer to buy it, the owner says no, he will just keep grazing cattle there. We give it a month for him to ripen and hit him again and he says no and I say I think you want to develop it yourself don't you, he says yes I say ok why don't you make that possible now because if you wait for the county to improve that road it won't happen for at least 20 years and probably never unless you pay for it. We own the land you need to own to have access to develop your land. You are going to make millions but you need to decide now because we are going to build four houses on it soon. He put out a very good price and I said your being fair so we won't argue and we will take it.
The big thing is we were not even going to go to that tax sale except for our pockets being full of poker winnings, talk about a parley.
Flipper · Port Deposit, MD · Member since 2014 · 280 posts · 171 votes
11y
@Ursula B. Please let me know if your scores recover quickly... We are considering financing about 40k worth of rehab this way which will bring my util to nearly 70% from 0%. I'm very proud of my FICO score and would hate to tank it 50 points long term.
Fair enough. Sometimes things get lost in translation on the web. I did ask my wife to order the jester hat on Amazon so I can show properties with it on :)
LOL. I have one, don't tell anyone....did I just say that outloud?
Involved In Real Estate · Winston-Salem, NC · Member since 2013 · 277 posts · 188 votes
11y
@NA Jones Will do. I went from 16% utilization to 68% utilization when I pulled the money. Hopefully paying it back so quickly will at least get my score back to where it was.
Madison Heights, MI · Member since 2014 · 471 posts · 132 votes
11y
The decrease in FICO from maxing a credit card is only temporary. OTOH, the more you push the limits of your cards, the more likely the banks are to increase your limits..
The decrease in FICO from maxing a credit card is only temporary. OTOH, the more you push the limits of your cards, the more likely the banks are to increase your limits..
It's a little more than that. The more you push the limit, and pay it back, or make payments on it, the more they will increase it.
The decrease in FICO from maxing a credit card is only temporary. OTOH, the more you push the limits of your cards, the more likely the banks are to increase your limits..
It's a little more than that. The more you push the limit, and pay it back, or make payments on it, the more they will increase it.
Right. And when you apply for additional cards, they look at the limits on your existing cards. A large amount of credit can be obtained via CCs over time.
Involved In Real Estate · Winston-Salem, NC · Member since 2013 · 277 posts · 188 votes
11y
@NA Jones My score recovered, and I'm actually 11 points higher than I was before I pulled the money. No real change other than repaying the credit lines. Ii'll never be able to figure out their scoring model...
Contractor · Round Rock, TX · Member since 2013 · 767 posts · 389 votes
11y
I had a customer a few years ago that decided to build his own house using credit cards to pay everybody to get points and miles. Then get a mortgage to pay off the cards and he'd be home free. Problem was that as he was finishing his house was when the sub prime crash hit. He had a hell of a time getting a loan. He finally did through some small bank that carried it in house. It all worked out, but he was pooping bricks there for a while looking at the credit card interest he was about to pay.
Investor · Hanford CA · Member since 2016 · 77 posts · 11 votes
8y
@Brandon Turner I know this is an old thread, but if you could give a quick and dirty of the strategy you used when using the 0% interest for 18 months that would be, in the most used word of the BP podcast "Awesome". I know you're busy man but a few bullet points would be super helpful. Worth asking!
I am really considering using this strategy on my next rehab and hold. I have like 3 or 4 CC companies constantly sending me these checks, and 18 months is long enough, even with a cushion for a refi after a year of seasoning and pay those suckers off. Thanks
Investor and CPA · Georgetown, IN · Member since 2017 · 17 posts · 12 votes
8y
Brett - I am definitely not Brandon Turner but I utilize credit cards as part of my capital stack. I don’t use cash advances. The cash advances typically carry a large fee and they won’t let you disburse 100% of the balance.
I recommend using cards that have attractive balance transfer offers (I.e. the 2% or 3% of balance to transfer) and then 12-18 months of 0%. Chase Slate seems to have the lowest transfer charge of 2% for 12 months both Bank of America is actually the same even though it is 3% but for 18. You can then use 3-4 cards of similar balance to roll the funds from card to card and carry the balance or pay down the balance on one card and wait on a new 0% offer (which usually takes a month or 2).
I also request balance increases abound every 4-6 months to work the balances up higher and higher. That will help offset some of the negative hit on the credit report. MyFico.com will let you run what-if scenarios on all 3 of your credit scores for $30 a month and you can cancel after the first month.
Real Estate Agent · Alpharetta, GA · Member since 2017 · 151 posts · 76 votes
8y
I haven't personally used the transfers myself, but I found a card for my GF to transfer a huge CC balance to with a very small fee and no interest for 12 months. She was able to pay it off then without the massive interest she was paying before. I have heard of other people transferring it again after the 12 months before all the interest is incurred
Real Estate Agent · Richardson, TX · Member since 2014 · 511 posts · 161 votes
8y
@Brett Hearn open an LLC and if you have a solid credit score, they'll throw 0 percent credit cards at you for 12-18 months. Just make sure you have a solid plan to pay them off.