Using Credit Card Cash Advance 0% interest for 12 months

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Using Credit Card Cash Advance 0% interest for 12 months

Michael Sothern
Delran, New Jersey / Philadelphia · Member since 2015 · 5 posts · 0 votes
Due to my lack of documented income (I am paid in cash) I have had a hard time qualifying for a loan. Credit score of 750+. Example of property I am looking to purchase: Credit Card Cash Advance: $30,000. Personal Monthly bills $500. Purchase price $60-80k Repairs: $5,000 Arv: $150,000 Monthly rental income $1,000 + Property taxes $2,000 Goal is to find owner financed property. Put $10-20k cash down using Credit card cash advance (12-18 months 0% interest) and make monthly payments to seller. Then do work needed & put renter in. After 6-12 months refi into standard loan. I would like to purchase a single family home and rent out to Section 8 tenants. Will I be able to refi before 12 months if I have used cash advance or will this option not work. I am looking to refi based on fact I have a cash flowing asset with equity. I imagine most lenders will not be willing to give me loan when they see I have used credit cards to purchase. Was hoping certain lenders will give loan based on cash flowing asset. Any advice would be greatly appreciated. Thank you in advance. Michael Thank you BiggerPockets. You guys educate & motivate countless amounts of people. Keep up the amazing work.
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Darren Budahn
Investor · Milwaukee, WI · Member since 2014 · 811 posts · 420 votes
10y
I would heed Joe's advice. On another note, how confident are you in finding properties with a purchase price of 60-80k that only need 5k in repairs with an ARV of 150k? Because if you can find deals like that you will have no trouble finding funding with private or hard money.
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  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    10y

    That's not the way you use the 0% CC.

    First, the CA is usually not included in the 0% interest...it's usually very high.  There are ways around it, but you need more than one 0% CC to do it.

    Second, Never count on a future event getting you out of the future high payment (when the CC 0% is over).  If you can't qualify now for a loan, what makes you think you'll be able to qualify for the refi.

    Using a form of Non-lienable debt (which is what you are attempting to do) is a great way to fund REI. Actually, it's probably the best...even better than cash, but you have to understand how to execute the use of it in a very special system/plan...or you are going to drill yourself into the ground.

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  • Darren Budahn
    Investor · Milwaukee, WI · Member since 2014 · 811 posts · 420 votes
    10y
    I would heed Joe's advice. On another note, how confident are you in finding properties with a purchase price of 60-80k that only need 5k in repairs with an ARV of 150k? Because if you can find deals like that you will have no trouble finding funding with private or hard money.
    3Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    10y

    You can use your tax returns to verify income. Using a credit card is a bad idea starting out. I would recommend you save up cash or start out with something less cash intensive.

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  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    10y

    Using 0% for 12 month credit cards is one of the best ways to get the ball rolling...even if you have a ton of cash.  The problem, is not realizing how to use them correctly. There is a very speific plan/proccess you MUST use in order to not have the 13th month come back and bite you in the...

    The power that this type of funding has is actually better than cash, but again, you have to know how to use it correctly.  I've seen disasters take place from:

    1 - Not moving fast enough from deal to deal
    2 - Not understanding the "cash like" status of these funds
    3 - Not setting aside a Cash Reserve of one full year from the original funds, and...
    4 - Not expanding the width of your system in order to compound the use of these funds as well as "refuel" the cash reserve as needed.
    5 - Not prepairing properly (see #'s 1-4 above) for the 13th month, and/or...
    6 - Not knowing how to get the 12 months, and the available approved balance increased BEFORE month 13.

    These are just a few of the issues to deal with.

    Here are a couple of advantages:

    1 - You may never need to get any future funding...ever.
    2 - You can, if you understand the methods of use, quickly expand the use of these funds.
    3 - You can, in a very short time, depending on the market (by that mean you must be in the correct market) you are in, get to a retirement value of cash flow.
    4 - Used propertly, the initial (and only) cost of the funding will be insignificant.  

    This type of funding is my all time favorite, to the point I designed a Software system around the planning and use of it for myself, so I couold plan it out, and monitor it as I went through the process...and it was a lot of fun too. 

    2Reply
  • Joe Doman
    Investor · Canton, MI · Member since 2014 · 132 posts · 32 votes
    10y

    What credit cards offer 12-18 month grace period on cash advances?? I've seen grace periods on balance transfers but not cash advance. -If these CC are available please share.

    0Reply
  • Marcus Johnson
    Investor · Saint Paul, MN · Member since 2015 · 663 posts · 512 votes
    10y
    So with that said you don't have money. Not a good start.
    0Reply
  • Michael Sothern
    OP
    Delran, New Jersey / Philadelphia · Member since 2015 · 5 posts · 0 votes
    10y

    Hey guys thank you for the advice, I really appreciate it. 

    And Marcus someday maybe I'll have enough money to buy a duplex in MN. You mogul you. 

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  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    10y
    Originally posted by @Joe Doman:

    What credit cards offer 12-18 month grace period on cash advances?? I've seen grace periods on balance transfers but not cash advance. -If these CC are available please share.

     Never seen one either.  They usually offer it on charges and transfers.  So, you have to draw the cash advance, and before you get "nailed" with the high interest, you transfer the balance into one of the other cards.  This means, you need more credit than you need cash.

    Obviously there is more to it though.  This is why I say it is a great way to do this, but only if you know how to use the "cash like substance", and how to manage the overall debt.  It's not hard, but if you don't follow certain procedures, you're going to bury yourself.

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  • Michael Sothern
    OP
    Delran, New Jersey / Philadelphia · Member since 2015 · 5 posts · 0 votes
    10y

    Cresit Card companys always send 12-18 month low/no interest rate checks. Write a check to yourself. 12-18 months to repay with 0%-2.5 interest. Based on $15000 credit card you have access to $14,500 after you minus 500$ charge for loan. Based on .025% monthly interest on amount borrowed your paying roughy $350 payments on cc balance. 

    I planed on using this along with other CC at same rate to gather my down payment. 

    Then refi out with a commercial banker after I prove the asset is cash flowing with equity. 

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  • Michael Sothern
    OP
    Delran, New Jersey / Philadelphia · Member since 2015 · 5 posts · 0 votes
    10y

    obviously this method is risky and not preferred. If you buy correctly and have exit strategies in place it will work. 

    0Reply
  • Joe Doman
    Investor · Canton, MI · Member since 2014 · 132 posts · 32 votes
    10y

    @Michael Sothern

    I've seen those CC checks come in the mail... I'm  always wary of hidden fees/interest even with the promo: no int for 12 mo. Have you used this before? Is it just the transfer fee that's charged?? -Seems like writing a check to yourself would be considered "cash advance" where they charge interest no matter what..? 

    0Reply
  • Chris Sukala
    Rockford, IL · Member since 2015 · 343 posts · 95 votes
    10y

    @Joe DomanBank of America right now will give 0% for 17 months. I think there is a 3% charge up front 

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  • Chris Sukala
    Rockford, IL · Member since 2015 · 343 posts · 95 votes
    10y

    @Michael SothernI actually have my second remod on one right now I just refi the House so I will be paying this off. I guess as long as you have a cushion of time to get things refinanced you should be ok.  unfortunately it took from Jan 1 until last week to get mine refinanced. This was a property we bought free and clear for 30k did 25k of rehab and was appraised at 74900. We had to wait 12 months to get 70% of the appraisal price. Anything sooner we would have just received 70% of purchase price. So make sure you check your area for those qualifications before using that 0%

    Good luck

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