So I was just wondering others thoughts on utilizing a credit card I am able to get with good credit that has an 8-9% interest rate? Thinking of utilizing it for short term fix and flips so I won't be hanging on to the balance long and it seems pretty low. Example being buy the property and utilize the low interest card for reno. Those rates seem just as low or lower than most private loans I've seen. Any thoughts?
I have heard of other investors doing this however it is a little risky. What if the market turns and you can't sell the house?
I would suggest maybe a home equity line of credit if you have another property you can tap into. The interest rate is usually not too bad and you can draw from it many times.
Yes I love lines of credit and utilize them as often as possible. Actually just wondering if that seems like a decent idea for rehab or partial rehab costs if bank financing is out of the question. Its only 8-9% which is what I believe I'd be paying or more with private loans. Wondering if anyone has ever obtained a 8-9% credit card and used it like that?
Thanks for the input
@Shawn West Have you investigated the newly advertised credit card being offered by Citicard, I think, at 0% interest for 21 months? Why pay 8-9% interest if you can get 0%?
I've done the no interest many times. I just don't like to keep opening cards over the years. Speaking of that anyone have thoughts on continuly opening credit cards for the zero % interest term?
Private money is secured against the property. Credit cards are secured against you, including every single one of the properties you own. Also carrying over a high balance for a few months might negatively impact your credit score, depending on how high the balance is to the amount you can borrow.
If you can get 8-9% from a credit card company, you should be able to get similar terms from a PML.
Often times a credit card cash advance has a flat rate fee on amount advanced and the 0% is often not for cash advances. Beware of the fine print.
cash advance rate is going to by sky high (~20%)
Always use a 0% card. No reason to ever pay interest on a credit card, if that means you have to open a new one every year then you do it. (doesn't hurt anyway).
Secured line of credit still may be your best bet though, less risk and while you'll pay a little more in interest (~3-4%) you won't have many timelines working against you.
Thanks for the great advice everyone. One more question. If I were to get a 0% card every year or 2 what should I do with it after the promotional 0% period is done? Should I cancel it or just shred it and keep it on my profile of cards but not using it? One way I worry about credit getting hurt with canceling and the other having so many cards under my name. Thoughts?
To your original question:
I would consider doing it once with two or three exit strategies in place to ensure I was out of that debt into cheaper debt as soon as possible. But this would in no way be my primary means of funding business ventures.
To your follow up question:
I think that if you are beginning to entertain opening low to 0% interest rate cards annually or every other year to fund your business, you may want to step back and thoughtfully consider what your end goals are and what your strategy to achieve these goals are. You can use credit cards, but that strategy may not be sustainable. It sounds like you'd be funding your business off of credit cards which you would want to run worst case scenarios against to ensure your business could remain solvent.
I hope that helps.
Yea I actually probably wouldn't continue using them forever and I do have other strategies but many times I'm maxed out on my line of credits or dept to income. Just thinking of other ways to get a little extra cash to finish deals and maximize. Funding seems to always be the hardest part. Thanks for the thoughts though.
You must be a BiggerPockets member to post on the forums
Join the world's largest, most open Real Estate Investing Community online, 100% free forever!