Milwaukee, WI · Member since 2015 · 30 posts · 5 votes
Hi everybody! I have been wondering if any of you have ever used a credit card to purchase a SFR free and clear. If so, how would you generally go about quickly paying off the balance of the credit card? HELOC, a Home Equity Loan or refinancing?
Rockford, IL · Member since 2015 · 343 posts · 95 votes
9y
Steven Scheer it depends I guess. I try to think of other ways also. Hypothetically if you had a zero percent CC that would take you to 14 months out but able to refi at 12 months should be good. Since we are just bouncing off thoughts. If the place is ready to go and could be rented right away, the tenant could make the payment.
Milwaukee, WI · Member since 2015 · 30 posts · 5 votes
9y
@Christopher Phillips for clarification sake, I am assuming you mention a loan, you are referring to traditional financing. Please advise if you are not.
Milwaukee, WI · Member since 2015 · 30 posts · 5 votes
9y
@Christopher Phillips thanks for the info. From a newbie perspective, a HML would be a stretch as most HMLs require more money down. Or maybe I am not finding the right lenders. As mentioned before, I'm trying to get creative here so I can get more properties in a shorter period of time. Getting out of the rat race ASAP and all that good stuff. Thank you for your input and your polite disposition. It's refreshing to receive actual advice, as opposed to being told to "get real" when you're simply asking for advice on a potential approach.
Real Estate Agent · Garden City, NY · Member since 2016 · 3k+ posts · 1k+ votes
9y
@Steven Scheer No problem. Another option would be to find a partner to help cover the down payment portion. You'll have to share the profits, but it gets you properties sooner than saving up.
Milwaukee, WI · Member since 2015 · 30 posts · 5 votes
9y
@Rob Dayley as mentioned earlier, this is just brainstorming. If there is a way I can purchase a home free and clear using credit cards then immediately pay off the balance, I see it as a win. I'm reaching out to the BP community to gather input from fellow investors.
Did I post in the wrong area??? Is this not the creative financing forum?
Real Estate Agent · Scottsdale, AZ · Member since 2016 · 53 posts · 10 votes
9y
@Steven Scheer Hm... that's an interesting strategy, never really heard of that before. Anyway, you are in the right area - give it a couple days for other investors to chime in. Following this - I'm curious what they say about it.
Rockford, IL · Member since 2015 · 343 posts · 95 votes
9y
Steven Scheer it depends I guess. I try to think of other ways also. Hypothetically if you had a zero percent CC that would take you to 14 months out but able to refi at 12 months should be good. Since we are just bouncing off thoughts. If the place is ready to go and could be rented right away, the tenant could make the payment.
Real Estate Investor · Orlando, FL · Member since 2016 · 1 post · 3 votes
9y
Steven,
I've never personally done it. However, one thing you could do if you're willing to lose a few points is create a Square account and charge your credit cards for the total amount. Then you can deposit the funds from Square into your bank account and use it as cash. You might run into some merchant issues since that activity might look a little sketchy.
Rental Property Investor · Malvern, PA · Member since 2016 · 1k+ posts · 934 votes
9y
You probably need to think this through beyond month 1. Suppose you did buy a property all on credit cards. What happens when you have payments coming due?
You might be able to stretch this out 6-12 months if you have enough 0% interest cards, then maybe start shuffling balances to take advantage of free balance transfer deals, but sooner or later you are going to have to pay a bill. This could be a really bad situation if you don't have any money. It could completely wreck your credit and prevent you from buying real estate in more traditional ways.
Check to see what the minimum payments would be on your plan and make sure you are comfortable with that before diving in. Don't forget operational costs once you own the properties!
Real Estate Investor · Chicago, IL · Member since 2016 · 4 posts · 2 votes
9y
The last place I lived allowed me to pay rent with a credit card and did not charge a transaction fee. So, for 18 months I paid my monthly rent with a new credit card each month that I would open in the names of different LLCs. Collected substantial sign-up bonuses. I would always pay the balance off immediately and afterwards didn't touch that credit card. Any cards set to have a yearly fee after the first year I would cancel.
Ask why credit card companies happily gave me these sign up bonuses. Or, why they give them to anyone. It's not like they couldn't figure out that in Month 2 I earned a $600 sign-up bonus, cancelled the card, and then reopened the same card 13 months later. Even with people like me and however many people are avoiding consumer debt payments, they still make a killing. And a lot of that is people who think they will take advantage of the fast money and somehow beat the spread on cash advance fees plus accruing interest. Some do. Far fewer don't.
I can envision hypothetical situations where it would be +EV to finance real estate with credit cards. That said, on the practical level those situations are going to be far and few between and be subject to substantial volatility in results. I would avoid this idea entirely.
Rental Property Investor · Jersey City, NJ · Member since 2016 · 6 posts · 1 vote
9y
This is a risky strategy. If you have excellent credit and credit cards with high limits, you should receive cash advance checks with 0% interest rate for 12 months and a cash advance fee of 3% to 5%. You can combine 1 or 2 credit cards to purchase a property but you need to make sure you can refinance after the seasoning period by getting pre-approved for a mortgage. You may use this strategy in a property that can't qualify for conventional financing. After you complete the rehab and rent the property do a cash out refinance and have the bank payoff the credit cards used to purchase the property.
Also, your credit score and you debt to income is going to take a hit if you purchase using credit cards.
I wouldn't recommend using only credit cards to purchase properties, there are better ways get creative, for example getting a personal loan from (lending club, sofi.com, etc..).
Lake Oswego, OR · Member since 2015 · 174 posts · 115 votes
9y
@Steven Scheer Maybe I'm missing something - are you buying the whole house with a credit card, or just the down payment portion of a loan? I'm buying right now and had to sign a document with my lender specifically promising I'm paying with actual cash - curious if you are using a lender who will allow CC for a down. Thanks!
Real Estate Investor · North Ridgeville, OH · Member since 2016 · 97 posts · 81 votes
9y
Generally you must have the money in your account for at least a couple of months before making the offer. Especially if you are using this for the down payment. I have had three past mortgages and every one went through my bank statements with a fine tooth comb to figure out where my down payment money came from. Now if you are purchasing outright then they don't care. As long as you can show an adequate balance for purchase price and closing costs you are fine. I know someone personally who used to do this very thing. She would get cash advances on her credit cards and use that to buy property. Then rent the property out and pay off the cards using balance transfers along the way. Personally I think it's too high risk. You have to be extremely disciplined and you better hope nothing happens that causes a big problem. Personally I have used a credit union personal loan to pay for part of a property. I had about 60% of what I needed and borrowed the rest using a personal loan. I looked at LendingClub and prosper, but their interest rates and fees were too high for my liking. My credit score is pretty good at 780, so the credit union gave me a personal loan at 8% interest with no fees and no pre-pay penalty. The property cash flows about $300 a month after all expenses including the personal loan, so I thought the risk was worth it. The loan was only for 4 years and I plan on paying it off earlier with the extra cash flow.