Using Fund and Grow along with Plastiq for paying down payment

19 Replies

I was wondering if anyone has used Fund and Grow along with Plastiq for paying a down payment for investment properties.  Plastiq states that certain credit cards from Fund and Grow can be used through Plastiq to send down payment to an escrow account.  Does anyone have experience with this or other options in using Fund and Grow credit cards with conventional/unconventional lenders?  Please let me know.  Thanks. 

Thanks @Tereal Wilsonn.  Have you had any issues with Plastiq taking longer than expected to send out a check? I read reviews on BBB and alot of them are bad, but I don't always trust bad reviews.  I rather hear from a fellow member of BP to hear your experience.  

I just closed on a duplex with a conventional mortgage loan, and I used Fund & Grow and Plastiq to wire part of the downpayment. This was the process for me: 

  1.   Secure sufficient business lines of credit through Fund & Grow. I received about 60k of available credit in less than 30 days. (16k within the first week). I have a great credit score, good stated income, and about 50k worth of personal credit to my name already, so it was relatively easy to get approved. Just be sure to be available while they're talking with the reps at the credit card companies because sometimes they'll send you a string of numbers to confirm your phone number etc. 
  2. Set up a Plastiq account. Once you have the desired amount of business credit for the downpayment and have activated the cards, upload the card(s) that you'll be using to Plastiq, ( preferably Visa for real estate from what I'm told ). Next, set up the ability to send wire transfers. This is important since you'll want to wire the funds to the title company instead of the tradition check in the mail which can take 2-3 business days. They'll require that you fill out a bit more information, and even ask for a picture of you holding your driver's license next to your face to confirm your identity. It took a few days for me to be confirmed, so knock it out early.
  3.   Wire everything over early. As soon as you know your final funds to close and the closing date, call whichever credit card company(s) that you'll be using and let them know that you'll be making a pretty significant purchase within the next few days. Then send the funds to the title company through the wire transfer feature in Plastiq. Obviously take into account the 2.5% fee and the $30 wire fee. I have a Capital City Visa card with an 18k credit limit, so to be safe I only put $17,400 as the amount to wire. After the fees and such it bumped up to $17,865. 
  4.   Jump through their hoops. Plastiq asked me to send them the title company's contact info, and upload the final closing docs and the purchase and sale agreement with any addendums. Once submitted they said it was under review. After a few hours they asked me for a screenshot from the credit card account showing the pending amount. I sent everything over promptly and got an email the same day saying that the wire was approved and sent. I confirmed with title and sure enough, everything was there!

NOTES:

Ask Questions. I was very skeptical and cautious because I was relying on these business lines of credit to make this deal possible. I asked a ton of questions of both Fund and Grow and Plastiq, and I highly recommend you do the same because every deal and financial situation can look different. 

Get the Clear to Close. Cash deals are obviously different, but this was a traditional mortgage through a bank so I had to show sufficient funds to close between all the personal and business accounts* along with every other mortgage requirement. Business lines of credit don't count as funds to close, so you'll need to show and source sufficient funds before they give the go-ahead. From what I've heard, banks just need plausible deniability as far as funds go, so once you have the "clear to close", you can theoretically wire funds from somewhere else without issue. I'm not an attorney, not a mortgage broker, not a bank, etc., etc.

*make sure that your name is on all the business accounts that you use and get written permission from the other members to use the funds. 

Have good credit. Fund and Grow does ding your personal credit, and those inquiries will be asked about by the mortgage underwriter. Tell the truth. Your company is applying for business lines of credit through your credit score, but you are not personally liable for those accounts. If your credit score is high enough, you shouldn't have any issues.

This is information I wish I had before doing this deal, so hopefully it's helpful! Good luck and God Bless! 

@Jonathan Moody 

Good information but I'd like to add some additional points (note that your mileage will vary due to numerous variables).

For those looking to use the Plastiq + Credit Lines for a down payment/closing costs you need to consider the following:

  • Most banks will normally require seasoning of funds so if you use Plastiq to perform a wire transfer to your bank account (or that of the Title company) it may throw up red flags. In my case my bank asked for a few monthly checking account statements so they could see my spending habits
  • The gift of giving- A few months back a co-worker was looking to purchase a home (not for investor purposes) and they received a "down payment as a gift" from a family member. The donor would just need to write a letter informing the bank that the "gift" does not have to be paid back. Now, I have not tried this but in practice I see no reason why I could not use a service (Plastiq, Venmo?) to pay my sister who would then gift me the down payment via check or wire transfer. It would just cost you the extra service fee + wire transfer fee. I should note that this may be considered manufactured spending

So will the Fund & Grow along with using Plastiq method to cover the whole purchase price of a property work? Purchase like so, use 401k loan to rehab, then rent and refinance is the plan that I am considering for my first property. Thanks in advance for any help.

Originally posted by @Mitch Wittman :

So will the Fund & Grow along with using Plastiq method to cover the whole purchase price of a property work? Purchase like so, use 401k loan to rehab, then rent and refinance is the plan that I am considering for my first property. Thanks in advance for any help.

At least a few forum members have used the Plastiq method to purchase the entire property but to me there are some important factors. For example how much is the full purchase of the property you're looking to buy? What would be the minimum credit card payment with 0% and the APR after the introductory offer if you can't refinance in six months?

You mentioned using your 401K for rehab but how about using that for a down payment on the property and then using your credit cards for rehab costs?


@Tim Buckingham

From what I've read the payment would be 1% so at most 4-500 a month for a purchase price of 40-50,000 plus the loan amount for the 401k. The problem with the reverse method you propose is I would have a payment for the 401k loan around $300/month and then the holding costs of the mortgage until the refinance so roughly $400-500 for a total of say $800 To me it seems like the more cost effective route to use the bloc to purchase and 401k loan for rehab. The numbers look about equal either way except the loan costs would be greater having to finance twice essentially. Some of these properties will need significant reno so the first financing may be difficult to acquire. If that makes sense.

@Mitch Wittman

@Tim Buckingham

Here are the general considerations regarding 401k loans.

401k Participant Loans

  • If your 401k plan allows for 401k participant loans, the maximum loan amount is equal to 50% of the balance up to $50k. The repayment terms for a 401k participant loan are equal monthly/quarterly payments of principal and interest (typically prime plus 1%) over a 5 year term (longer if used to acquire your principal residence).
  • Please note that if you take a full $50,000 and then pay back the loan, you can't take another $50,000 until 12 months after the first loan was fully paid back.
  • Per the loan offset rules that went into effect with the 2018 Tax and Job Act: if you leave your job and the loan is current at the time you leave your job but then the loan goes into default because you left your job, you will have until your tax return deadline (including any timely filed extension) to make the loan current by depositing the outstanding balance into an IRA (and thereby avoid the taxes and penalties that would otherwise apply).



Please keep in mind the multiple loan rules:

Under those rules, the sum of the balances of a participant's outstanding 401k loans under a single 401k plan (using the highest outstanding balance of each loan over the last 12 months) can't exceed 50% or $50,000 whichever is less. Thus, if you took a $50,000 loan and paid it back within 6 months, you would need to wait another 6 months before you could take another $50,000 loan.

@George Blower   Are you sure on the part that you can't take another 401k loan until 12 months after the first loan is repaid?  At my company it's only 7 business days after the first loan is repaid.  I'm wondering if it's different by company.  We use John Hancock and it clearly states:

"you will not be able to take a distribution or another loan until at least 7 business days after your loan repayment has been processed"

@George Blower   Thanks for the link.  I see the discussion, but it's talking about the amount "Jim" can take for the next loan, not anything about the time period between when one loan is paid off and the time until he can request a new loan.

Asking more out of curiosity, I would be surprised if John Hancock had something incorrect posted on our retirement plan web page.  The quote I posted about the 7 business days is directly from their webpage.

@Tom S.

1) Under the IRS multiple loan rules there is a 12 month look back period (see reference to 12 months in the IRS post) whereby the highest outstanding balance of any loan during the prior 12 months will be considered outstanding for purposes of calculating how much you can take on a subsequent loan.  For example, if you take a $50k loan and then pay it right away you need to wait another 12 months before you can take another $50k loan.

2) Even large companies like John Hancock have incorrect or incomplete information all of the time.  The 7 day period is likely just a rule that they have for administrative convenience.

Hi @Pradeep Varghese . I used this strategy last year on a rental property purchase. You have to verify which cards are available to be used at a title company. Then you setup a wire transfer to the title company through the Plastiq website. Similar how you would wire cash funds at closing. It was a really easy process. A litter nerve racking the first time, but it really does work!