Using credit cards to fund the purchase of rental properties

[Robert Ferrell]

Is there anyone out there who has used credit cards to fund the purchase of a rental property? I am planning to use my cards as a tool to aquire property and then get a cash out refi as soon as possible to pay off those high interest cash advance/balance transfer fees. Then, rinse and repeat (aka the BRRRR strategy). If there is anyone who has done this successfully and would be willing to talk about the process, I would be very interested to talk!

[Stuart M.]

I haven't, but I imagine if I had to, my first step would be to acquire credit cards that had a total limit that was double what I was taking out so that none of them are over 50% utilized.  I'd also look for cards that allow you to write checks directly to yourself (barclay cards for example.)  Also look for cards that have the longest terms for single fee 0% ongoing (or as close to it) balance transfers (most common is a 3% fee, some credit unions are 0% fee but higher interest, some barclays cards are 1-2%.)

Look at repayment terms - some cards make you pay back 1% per month (barclays cards), others up to 5% per month.  So, for a 50k balance, card A has a min payment due of 500/mo, card B would be 2500/mo, even though they have the same balance.  Look at how they calculate the min due - 2% of balance plus interest for example.

Your min payments are going to be wild for a while.  Like, probably a min of 1.5k per 100k, and that's assuming you can get a bunch of barclays cards, and could be closer to 3k or 4k per 100k, where as a mortgage would be $500/100k.

There are two ways to get the $ off cards that don't allow you to write checks to yourself.  One way is to find a card that does, write the check, then transfer the balance to the other card, then write the check from the first card again.  Problem is you'll get hit would double fees on the first card this way.  The second way is to transfer balance from a card that has no balance, you'll have a huge credit, and then in a month or so they will allow you to request a refund, and they will mail you a check.  This is a higher risk strategy and a good way to get a company to shut your card down nowadays.

Oh, and be careful, once you start loading up cards, the cards you haven't gotten to yet might reduce your limits to something like $1k.  Amex cards for example, if they see you incurring huge balances.  And some of your cards may drop your limit to just above what you owe once they see what you're doing, others may close your cards altogether.

And finally, when you go to refinance, now your credit score is lower because you have all this debt.  Make sure you'll still be able to refinance and not get stuck in a trap.  Having a spouse helps here, especially if one of you makes a lot more than the other - the one with the lower income can incur most of the debt, then put the house solely in the other spouses name when you buy it, and have them refinance when it comes time.  Though someone else will have to tell you the limit on a cash out investment property refinance.

Did you look at hard money loans? Is there a reason you can't get a mortgage?  If you have the credit and income to get enough cards and afford the min payments, it seems hard to believe you don' t have the credit and income to get a mortgage. I'd try to find as cheap as possible of a house if I was doing this.