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.
Real Estate Investor · North Ridgeville, OH · Member since 2016 · 97 posts · 81 votes
9y
@Sam Shueh you only buy a personal residence using FHA and VA loans. You would have to live in the property for a given number of years before you could turn it into a rental. Now you can buy a multi-family property with FHA or VA I believe, and then live in one unit and rent the others. Legally I believe you can only have 4 mortgages in your name. If you can find the right property that cash flows good it is definitely worth a shot.
Milwaukee, WI · Member since 2015 · 30 posts · 5 votes
9y
@Rachel Luoto It would be purchasing an entire home using credit cards. None of the lenders I have spoken with will allow for an investor to make a down payment using credit card; which makes perfect sense to me.
As @Jason Martinez mentioned earlier, cash advances deposited to a checking or savings account could work. @Christian Steiner also mentioned a second strategy using a POS device such as a Square credit card reader.
Even if the loan officers I have spoken with allowed me to make a down payment using a credit card, I would not do it. Seems like it would be a cash flow killer.
@Sam Shueh: thanks, but this would be an investment property purchase. Do you know a way(s) to take advantage of FHA while not being an owner occupant?
Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
9y
Insanity.
Why use a short term debt solution (credit cards) for a long term debt (>1 year) application? While I am sure I could do it, why would I? I suppose I could build a house out of cardboard. But for the longer term, it doesn't make sense.
Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
9y
I understand. Just realize you are using the wrong tool for the job. Other people, not directed at you, will read your post and conclude "hey, I can use a credit card for ... buying a house... or a $40K real estate seminar... or a business..." The results are usually not ideal.
Milwaukee, WI · Member since 2015 · 30 posts · 5 votes
9y
Oh, I know all about the $40k hard sells for seminars. The red flags immediately go up when somebody offers me strategies on increasing my credit limits to pay for a 2-day seminar that cost more than my college education. For all the good that has come from reading "Rich Dad, Poor Dad" I'm not a fan of what I have seen from of the supplemental materials and their associated costs (disguised as investments at the seminars). Thanks for your input. I misinterpreted your original post as a personal attack.
Rental Property Investor · Carmel, IN · Member since 2016 · 1 post · 1 vote
9y
I recently did this... I had an opportunity to pick up a unit but needed to close quickly before a rental restriction went into effect... I didn't have all of the cash available so I took an advance from 4 CC's at an average upfront fee of 2.25% with 0% interest for 16 months. Quick and easy close, now time to refinance.
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?
Thanks!
Hey Steve,
I just read the first few replies but I'll say this. If using a credit card is your ONLY option, then I think it is a bad idea. If you can't get a loan and private lending has turned you down, there is probably a reason. I would not recommend using a credit card. But, if you're thinking about using a CC and you can pay it off the following month, etc, then it's not a horrible idea.
Just think about it this way. If you're doing it for convenience, they will take it, and it doesn't cost you an arm and a leg in finance costs or advance fees, why not? If you're doing it because it's the only way you can think of to get the funds, that's a very dangerous road.
Real Estate Investor · Chicago, IL · Member since 2016 · 4 posts · 2 votes
9y
Originally posted by @Account Closed:
@Donald Powell - How did you open credit cards in LLCs without that effecting your credit score? I'm really curious about what you did.
As far as I know opening a new credit card adversely affects credit only slightly and the effect is only temporary. That said--long term--a new credit card (assuming you aren't maintaining a balance) decreases ratio of total debt to total debt limit and this decrease would result in a higher higher score.
Rental Property Investor · Chicago, IL · Member since 2016 · 318 posts · 307 votes
9y
@Rachel Luoto no conventional loans require cash from your bank account and proof it's not from other sources. Along with the written agreements you mention that its not a loan. I assuming this is a cash purchase deal.
I like @Steven Scheer idea. Pull cash from a credit card (as low interest as possible via special promos, balance transfers, and strategic planning). Traditional banks have risk tolerance levels and can't loan on certain properties in bad condition. If you do the research, your analysis should suggest if the deal is sweet enough for 18%-27% interest. Higher than hard money, but definitely an option for a quick flip or BRRR. As long as you have enough credit to cover the purchase/rehab. If you are short on credit mid-rehab, its all downhill from there, because credit is maxed out and no rental cash flow is possible in that state.
The key is 1) timelines (longer the more $), 2) having multiple exit strategies, 3) ensure the ARV is correct, 4) some source of reliable cash flow. If you have a decent paying job, $100K on a credit card is similar to a mortgage payment. I wouldn't advise someone with no job and/or savings to do a credit card flip.
Philadelphia, PA · Member since 2014 · 129 posts · 29 votes
9y
The name of the game is to get your business credit up to par and use that as the vessel. This way you are completely separated from this entity and can buy real estate under your business name.
Warren, NJ · Member since 2017 · 24 posts · 1 vote
9y
Sorry if this duplicates what others have said asked: What I'd like to understand with a CC purchase is how to avoid either a fee for cash advance on the card or, alternatively, getting charged more by the seller? If I was selling, assuming I had a merchant services account to allow this, I would be paying a % of the swipe to process the payment. I would expect the buyer to pay that; it would effectively be a closing cost to buyer. And if there was no merchant services account, and it was cash to be paid, presumably there was an upfront charge on the cash from your bank. Are there circumstances where cash can be advanced at minimal or no cost? I imagine this happens from time to time. But I don't assume that having that was reliable. So @Steven Scheer if you see something that allows you to do this without cost, I'd certainly want to hear more.
Real Estate Consultant · Lancaster, CA · Member since 2014 · 423 posts · 223 votes
9y
Using a credit card is perfect for flipping properties that you intend to hold for 6 months or less. If you have a 0% interest card that allows you take cash advances for free, or even if they charge you 3%, with no interest due and minimum payment amounts, this is a gold mine for flippers. I would do this all day long in my sleep. I don't have the credit score to get these cards, but I would partner with anyone who can. I have a system that uses leverage, while managing and shifting risk in order to generate double digit annual returns. I say use leverage, just use it wisely.