Using credit cards to purchase properties.
So, I've heard on the podcast that others have used credit cards to purchase properties before but I am having trouble figuring out how they got the funds off the cards to pay for anything. You see what my plan was was to use my credit cards for the down-payment of a property but I'm just finding out that I can't even transfer my cards funds to a checking account. So I'm wondering if there is a way to get the money off the cards to pay for the down-payment that I am unaware of or not?
Bad idea...even if it were possible, the interest on credit cards is around 22%. Even hard money lenders only charge around 12-15% interest.
@Clint Vonburg Agree with the above, very expensive way to go. Best if you can do it short term, one of the "0% interest for one year" deals and use a balance transfer check (although they still charge 3% of the amount transferred).
There are others ways to get cash off the cards like Paypal or Venmo off a credit card, but again, lots of fees.
Quote from @Tom S.:
@Clint Vonburg Agree with the above, very expensive way to go. Best if you can do it short term, one of the "0% interest for one year" deals and use a balance transfer check (although they still charge 3% of the amount transferred).
There are others ways to get cash off the cards like Paypal or Venmo off a credit card, but again, lots of fees.
Yeah i know that, I only have one card that has the interest rate, which I planned to pay first but all the others are new and have 0% right now.
@Clint Vonburg, are you looking to buy rental properties to rent or to live in/house hack and what is your purchase price range?
I have been working to get business cards for my entities, and have found those "free" seminars by money raising-credit card companies. If my DTI gets too high because I pull cash off my cards, then I won't be able to do the refinance that I look to do at the tail end of renovation. I'd prefer to have credit on the business side, with no personal guarantees. And it is slow work getting the business cards with limits high enough to do any real work. For these few reasons, I would prefer hard money or private money. Even better, seller financing.
@Kerry Baird, What kind of rentals do you do? Have you worked with DSCR loans before?
Have DSCR on most of my long term rentals. And have seller financing on my STRs. Yes, I love DSCR for their ease; I am flabbergasted at the high rates this month.
@Kerry Baird, let me know if you would ever like another option for DSCRs/check rates. I'm a mortgage broker who works with wholesale lenders (that don't work directly with consumers) who do DSCRs for STRs and long term rentals.
@Clint Vonburg get a 0% interest BUSINESS card that has the 0% offering for a year or more. Use Plastiq to pull the money off. Get a non-recourse loan where down payment is from the credit card. Just know you are kicking the can down the road and you will have to pick it up some time;)
It is important to get a Business credit card rather than personal because it won't show up on your personal report unless you default (but don't get a capital one card because all of their business cards report to personal credit bureaus).
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#3 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
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Why not use hard money? Interest rate is cheaper
I've used business credit cards for all renovations. It's cheaper then hard money and the supply vendors normally take credit cards so I don't pay the transaction fee. BTW did you ever think about unsecured line of credit? Shoot me a DM if that interests you.
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Quote from @Clint Vonburg:
So, I've heard on the podcast that others have used credit cards to purchase properties before but I am having trouble figuring out how they got the funds off the cards to pay for anything. You see what my plan was was to use my credit cards for the down-payment of a property but I'm just finding out that I can't even transfer my cards funds to a checking account. So I'm wondering if there is a way to get the money off the cards to pay for the down-payment that I am unaware of or not?
I did this a lot in 2010-2012. I did 'balance transfers' to my business bank acct. Also used the cc checks as down payments on seller financed purchases.
Then my credit utilization got too high and my 0% turned into penalty pricing at 24.9%+ even though I never missed a payment.
Much safer is to buy materials for your rehabs with intro rate cc's. Then pay them off before the rate resets to normal.
@Clint Vonburg
I use credit cards for rehabs. Citi sends me those convenience checks for up to 25k with 0% interest for a year (with a 3% service fee). I’ve bought houses with 401k loans then use these credit card checks to fix them up. Just make sure you pay them off within a year! It’s an easy way to buy or rehab houses for free. Then once you have tenants in place, pay the credit card off with the rent!
Doesn't sounds good.
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That method is exactly how I started in this business and as a result, have access to large lines of credit at low interest rates. There is a discipline to this and needs to be done with caution. Also, you need to know which cards are currently offering low interest rates.
Best of luck!
I'd throw this in the category of "just because something works does not mean that it is a good idea." You can find anecdotal examples of someone purchasing a cheap house with 0% introductory credit card debt that have worked out. It's still a bad idea.
I've used a 0% for 12-18 months card for renovations, but I also had a 5-6% interest line of credit as back up. The card ended up being paid off in about 6 months, but knowing that I had a back up plan to zero out the balance prior to 24% interest hit was the only thing that made the credit card option palatable.
As someone who has done this many, many times over, let me just say-- it's a high-risk, high reward strategy. Can it be done? Yes, absolutely. Should it be done by everyone? Probably not, people, in general, are idiots and can't handle it.
If you get a check in the mail, that's a balance transfer from your credit card-- which you can technically write out to yourself. You go cash that check and magically you have say $20K cash for 3% fee for 1 year-- YAY! That being said, banks are going to run your credit and IMMEDIATELY say -- why did you just take out $20K debt-- big red flag? You can't borrow for a down payment. If you did this-- you technically have to "season" the money, and let it sit for 2-3 months of statements. It gets messy, because if your credit score tanks, a bank won't lend you any $$$, or they might loan it to you at a much higher rate. If you have a partner, this is where the strategy comes into place because you can keep one partners score very, very high for prime rates, meanwhile the other person carries the debt and their score tanks-- until the refi, when the credit card debt is paid off and they are back to normal. Your final cash out refi (likely 60-70% ARV) is your exit strategy to pay it off.
Also check out lendingclub.com, or prosper.com, where it will be a hard pull but won't affect your score as much as credit card debt.
@Clint Vonburg
Hello Clint I have a Logix Credit Union Credit card that lets me transfer my whole limit amount to my checking account.
Also I have an AVEN home equity Credit card that also works the same way if you equity in a property you want access to
Brad
Quote from @Kerry Baird:
Have DSCR on most of my long term rentals. And have seller financing on my STRs. Yes, I love DSCR for their ease; I am flabbergasted at the high rates this month.
A few of my lenders actually did a price correction this week. Rates improved for now.
Sorry i haven't replied as I haven't been on in a while, I've decided to give up on that method and just save up as much as I can as I wait for my 2 years worth of income from working with Door dash comes in. That way I can utilize different loans such as the second home FHA loan. My plan is to do the mid term rental, and I am currently turning the extra bedroom of my house into a furnished private room to rent on furnished finders. If everything works out I'll be able to save faster.
I would like to use a personal loan for the down payment and purchase a investment property two units for long term rental. but nobody likes it.
Quote from @Clint Vonburg:
So, I've heard on the podcast that others have used credit cards to purchase properties before but I am having trouble figuring out how they got the funds off the cards to pay for anything. You see what my plan was was to use my credit cards for the down-payment of a property but I'm just finding out that I can't even transfer my cards funds to a checking account. So I'm wondering if there is a way to get the money off the cards to pay for the down-payment that I am unaware of or not?
You can pay the renovation cost on the credit card which is normal but in qualifying process many lenders aren't going to want to see leverage pulled to purchase a property on a high interest card. I would try to get 0% apr card to hold the renovation cost after you are close then pay it off with the rental income.