Quickly Becoming Over Leveraged on Credit Card renovating a House.

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Quickly Becoming Over Leveraged on Credit Card renovating a House.

Member since 2022 · 10 posts · 7 votes

What do you when you used credit card debt to renovate a house that was over budget and still need to finish the renovation?

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Jill F.

Investor · Akron, OH · Member since 2016 · 2k+ posts · 4k+ votes

We are buy and hold renovators but we make extensive use of home depot project loans (recently around 7%) with 66-72 month pay off. We also uses lowes fixed loans which are available at 7% anytime you use your personal card for a purchase of at least $2000. Our at&t universal card was recently offering up to a 20k fixed loan at 6.99% with 60 month repayment which we were also able to take full advantage of. Good luck.

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Kerry Noble JrPro Member
Investor · Indianapolis, IN · Member since 2018 · 2k+ posts · 1k+ votes
3y
How much more do you need to rehab and whats the total amount left that you need to rehab?
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Ned CareyPro Member
Moderator
Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
3y
@Ginger Spurlin
1) Find friends family or associates to laon you the money, this is what people call "Private money"
2) See if a Hard Money Lender can help you out. This will likely only work if you don't already have a loan on the property
3) Consider selling the deal if you can get all your money back and move on to the next better deal.
4) If it is a deal that just doesn't work, sell it now and take your losses before they get bigger. Don't throw more money at a bad deal. Don't borrow from friends or family if it is not a slam dunk to work out.
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Scott Mac
Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes
3y
You could always call the 800 number on the back of the cards and ask the issuer for a credit increase.
Ask a relative for the needed amount as a short term loan.
Get a second job and pay as you go.
Sell something of value, a 2nd or 3rd unused vehicle.
Good Luck!
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Ginger Spurlin
OP
Member since 2022 · 10 posts · 7 votes
3y
Total Renovation Cost is $182k and I have $104k into it so far ($42k from HELOC on other home and $62k on CCs and Home Depot Loan). I only have $27k left on HELOC and was having to put the remaining $51 on CC and Home Depot Loan. House should be done by end of June worst case and was planning on Refi but I think i will be $20k to $30k over ARV. I bought 4/3 2100SF on 3 acres built in 1982 for 190k ($90k under asking) and I anticipate the ARV to be $350k. I am a rookie and miscalculated to rehab cost even though I've been in construction my whole life. New Roof, Windows, Siding, HVAC, Electrical, Insulation, Drywall, Tile, Cabinets, Appliances, etc. I plan on living in the house with my family until the market gets hot again.
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Steven Goldman
Lender · PA · Member since 2019 · 535 posts · 461 votes
3y
Ginger Spurlin: You could try to get a credit card consolidation loan from one of the many on line personal lenders. Pay off your cards and then use the new balances to finish the project. I really do not recommend that as you are going to be carrying a large monthly interest payment on the cards and the debt consolidation loan. The online lenders such as Lending club or best egg do a soft pull so it will not effect your credit to try to get a debt consolidation loan, If you are planning to occupy the property it is unlikely anyone other than your family will lend you money on a owner occupied deal. Good luck!

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Ginger Spurlin
OP
Member since 2022 · 10 posts · 7 votes
3y
I appreciate your responses! I guess my other concern it my ability to get a good rate on the refi since I will have so much cc debt.
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Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
3y
@Ginger Spurlin
If ARV is $350k you may get a $280k loan and you will be in it for $370k+
How are you going to pay the $100k in credit card debt that you may have. That is going to get crazy expensive
I would look to sell it now and try and limit your losses
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Jill F.
Investor · Akron, OH · Member since 2016 · 2k+ posts · 4k+ votes
3y
We are buy and hold renovators but we make extensive use of home depot project loans (recently around 7%) with 66-72 month pay off. We also uses lowes fixed loans which are available at 7% anytime you use your personal card for a purchase of at least $2000. Our at&t universal card was recently offering up to a 20k fixed loan at 6.99% with 60 month repayment which we were also able to take full advantage of. Good luck.
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Account Closed
Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
3y
Quote from @Ginger Spurlin:

Total Renovation Cost is $182k and I have $104k into it so far ($42k from HELOC on other home and $62k on CCs and Home Depot Loan). I only have $27k left on HELOC and was having to put the remaining $51 on CC and Home Depot Loan. House should be done by end of June worst case and was planning on Refi but I think i will be $20k to $30k over ARV. I bought 4/3 2100SF on 3 acres built in 1982 for 190k ($90k under asking) and I anticipate the ARV to be $350k. I am a rookie and miscalculated to rehab cost even though I've been in construction my whole life. New Roof, Windows, Siding, HVAC, Electrical, Insulation, Drywall, Tile, Cabinets, Appliances, etc. I plan on living in the house with my family until the market gets hot again.
Your comment: "I anticipate the ARV to be $350k." What if it's lower?

What is your assumption based on? Also, if you refinance, take into consideration all of the fees. If you sell, take into consideration real estate agent fees and closing costs and then capital gains if any.

It's rare to see a reno come in on time at budget.

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Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
3y
Quote from @Ginger Spurlin:

Total Renovation Cost is $182k and I have $104k into it so far ($42k from HELOC on other home and $62k on CCs and Home Depot Loan). I only have $27k left on HELOC and was having to put the remaining $51 on CC and Home Depot Loan. House should be done by end of June worst case and was planning on Refi but I think i will be $20k to $30k over ARV. I bought 4/3 2100SF on 3 acres built in 1982 for 190k ($90k under asking) and I anticipate the ARV to be $350k. I am a rookie and miscalculated to rehab cost even though I've been in construction my whole life. New Roof, Windows, Siding, HVAC, Electrical, Insulation, Drywall, Tile, Cabinets, Appliances, etc. I plan on living in the house with my family until the market gets hot again.

If you plan on living in it until the market picks up. Stop and prioritize the jobs to get it livable. Finish some parts of the home for living and leave the rest until you get your finances under control.

What is the interest rate on the credit card? Come up with a plan to pay down the credit card debt.

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Ginger Spurlin
OP
Member since 2022 · 10 posts · 7 votes
3y
Thank you all for the responses there is definitely alot to think about. I am committed to finishing the house. I have put alot of my own labor into it and I am doing a quality rehab not lip stick on a pig. Complete transformation. It's going to be a nice house and its hard to find a nice updated 4/3 on three acres in a very desirable school district down here. My realtor didn't help me with comps even though I asked him several times. I will find a new realtor and try and get my ARV dialed in. If the arv is lower then 350 then I'll have to carry more unsecured debt. The house is in drywall stage and I don't want to sell an unfinished house. I am going to live in it and it will be a good house for my family for a couple years.
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Ginger Spurlin
OP
Member since 2022 · 10 posts · 7 votes
3y
I am using 0% credit card offers that give you a flat fee of 3 to 4 % and expire after several months. I am also using a Home Depot project loan.
1 Reply
Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
3y
182k rehab for 350k house is risky project for sure but you have minimized it by living in there which is good. My suggestion is to delay the large purchase that doesn't add value til the end when you sell, put roof/plumbing/HVAC first. In my calculation, you may have to live there for 5-6 years.
But truly to understand the worthiness of the project we need to know the comps in the area.
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Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
3y
Quote from @Ginger Spurlin:

Thank you all for the responses there is definitely alot to think about. I am committed to finishing the house. I have put alot of my own labor into it and I am doing a quality rehab not lip stick on a pig. Complete transformation. It's going to be a nice house and its hard to find a nice updated 4/3 on three acres in a very desirable school district down here. My realtor didn't help me with comps even though I asked him several times. I will find a new realtor and try and get my ARV dialed in. If the arv is lower then 350 then I'll have to carry more unsecured debt. The house is in drywall stage and I don't want to sell an unfinished house. I am going to live in it and it will be a good house for my family for a couple years.

my first rule when adding rehab and waiting for market is to make sure the market appreciation rate is higher than interest rate debt. I am trying to do rehab when there's chance of IRR >= 30%. You dont need realtor when calculating comps and projecting appreciation but this needs to be done much earlier before starting the project.
2 Reply
John MorganPro Member
Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
3y
@Ginger Spurlin
Been there, done that. lol. Sign up for another credit card that has 0% interest for 12-18 months. And take out a 401k loan if you can.
1 Reply
John Carbone
Realtor · Gatlinburg · Member since 2020 · 1k+ posts · 957 votes
3y
Quote from @John Morgan:

@Ginger Spurlin
Been there, done that. lol. Sign up for another credit card that has 0% interest for 12-18 months. And take out a 401k loan if you can.
He won’t be able to get a new credit card with credit score taking a hit.

401k, IRA withdrawals are your best option. I absolutely would not sell. Worst case you pay 20 percent interest on credit cards if you exhaust all options. Get 2 or 3 jobs if needed to pay them off and sell any vehicles you have and replace with a junker.
2 Reply
Ana Kehoe
Lender · Member since 2023 · 10 posts · 2 votes
3y
Sell the deal through the wholesaler, collect payments and keep making payments on your current loan
1 Reply
Ginger Spurlin
OP
Member since 2022 · 10 posts · 7 votes
2y
Update,
Bought for 190k > spent 190k on rehab > appraised at $415k and refi 75%ltv at 6.99% so I still have loan on my HELOC. It ended up as if I would have put a down payment on a $415k house with a HELOC so I have a $310k mortgage payment plus 9% Heloc interest payment on this property. We moved in and are going to live here until it appreciates enough to sell. Thank you for all your help I learned alot on this one. Mainly, how to better pencil my next deal.

1 Reply
Kerry BairdPro Member
Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
2y
This is an excellent post…sometimes the finances don’t come through as we expect. Or the order of financing could be arranged differently. Or an appraisal doesn’t come in where we expect.
1 Reply
Bill Daus
Real Estate Agent · Arlington, VA · Member since 2022 · 8 posts · 2 votes
2y
Quote from @Ginger Spurlin:

Update,
Bought for 190k > spent 190k on rehab > appraised at $415k and refi 75%ltv at 6.99% so I still have loan on my HELOC. It ended up as if I would have put a down payment on a $415k house with a HELOC so I have a $310k mortgage payment plus 9% Heloc interest payment on this property. We moved in and are going to live here until it appreciates enough to sell. Thank you for all your help I learned alot on this one. Mainly, how to better pencil my next deal.

Congrats on making it through! I’m sure there was a lot of challenge and stress in that one and I’m sure the next will go better. And thank you for coming back to give an update!
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