Should I get a separate credit card for house hack?

15 Replies

Hey BP,

I recently purchased my first duplex to use as a house hack.  I have separate bank accounts set up for the property but was wondering if I should get a credit card as well?  There is about $10-15k of rehab work and it would be nice to capitalize on rewards while building credit.  Since I only have one property, I'm not sure if it's worth it at this point.  I'm leaning towards getting one, but would love to hear some other opinions!

Thank you!

Drew

Do not mix your personal expenses with business on the same credit card, checking account... It is just easier to keep it seperate. Put your gas that you use for this on this card along with any other expense you incur for the property.

If you have personal and business mixed when going through an audit you have a lot of explaining and proving every little expense.

@Mark Holencik agreed - I would only be using the credit card for expenses related to the rental side of the property

@Drew Markert I currently have a duplex that I house hack. To make things easier I set up a separate checking account to put rent in and pay the mortgage out of. I also did get a separate credit card to use just for house expenses.

This makes it a whole lot easier, especially if you misplace a receipt when doing taxes. I know everything on my credit card is house related. One thing to factor in is how much you can write off for certain expenses. Keep track of what items are purely for the rental unit and what items are for both units.

If it's an item that is technically for improvement of the whole house (landscaping, common area improvements, exterior siding/painting) you can only write off a portion. You'll have to figure out the percentage of the livable space is rented. In my case the rental unit is approx 33% of the homes square footage so I can only write off 33% of those items. If it's just for the rental unit you can write off 100%.

If it's an improvement to your unit keep it separate and not on the rental credit card or at least keep track of it. 

As a plus, I use my rewards as a check to myself every now and then and put that towards the mortgage/investment account. I don't know how it would work using "$100" in rewards to buy something for the rental unit and if I could write that off. 

Originally posted by @Adam Ramsey :

@Drew Markert I currently have a duplex that I house hack. To make things easier I set up a separate checking account to put rent in and pay the mortgage out of. I also did get a separate credit card to use just for house expenses.

This makes it a whole lot easier, especially if you misplace a receipt when doing taxes. I know everything on my credit card is house related. One thing to factor in is how much you can write off for certain expenses. Keep track of what items are purely for the rental unit and what items are for both units.

If it's an item that is technically for improvement of the whole house (landscaping, common area improvements, exterior siding/painting) you can only write off a portion. You'll have to figure out the percentage of the livable space is rented. In my case the rental unit is approx 33% of the homes square footage so I can only write off 33% of those items. If it's just for the rental unit you can write off 100%.

If it's an improvement to your unit keep it separate and not on the rental credit card or at least keep track of it. 

As a plus, I use my rewards as a check to myself every now and then and put that towards the mortgage/investment account. I don't know how it would work using "$100" in rewards to buy something for the rental unit and if I could write that off. 

 If you take the rewards in cash back you need to claim it as income. Just take the rewards and apply it to the card balance.

Thanks @Mark Holencik

That makes sense. If I apply it to the card balance I won't have to claim anything then?

I asked my accounant if I could just take it. He told me not to take a cash back. He told me to apply it to the balance. I do not remember his exact explanation.

@Adam Ramsey Nice!  I have my accounts set up the same way.  

@Mark Holencik That's also a good point.  It would make more sense to apply it to the balance if you would have to pay taxes on the income

@Drew Markert I do this nonstop. I will cycle through 1-3 new credit cards a year specifically around when I start a new project or need to do upgrades on an existing rental. I will buy materials on the credit card for the sign up bonuses. I don’t do the cash back ones as I tend to go for miles and points.

I just booked 2 1/2 weeks in Europe for me and my better half. Flying business class, and staying in Hilton suites the whole time, booked it all on miles and points that I earned from churning cards for sign up bonuses.

@Drew Markert Congratulations on your recent acquisition (many never get started).

Making sure you have an aggressive payment plan for the credit card(s(, as this is extremely important so that when you want to REFI your DTI is where it needs to be and that you can rinse and repeat relatively quickly.

Hope this helps. Goodluck. Thanks! - Ola 

@Andrew Kerr Good call!  I'm glad to hear it's working out :)

@Ola Dantis That's an excellent point - at this point, I don't plan on carrying a balance unless an unexpected expensive repair comes up.  Thank you for the input!

I think the cash reward which has an actual cash value as stated, would be income either applied to the account or taken as a check, and some other reward would have a relative value to what one might claim.

The best reason for me to have separate cards is the accounting as Mark Holencik has said. Even though I have never been audited in over 40 years I would want to have the right answers.

@Drew Markert I'm a newbie real estate investor and your question caught my eye because I'm planning to buy my first house hack within a year. 

When you opened up these accounts, did you do it under your personal name, an Assumed Name or an LLC? I was under the impression that you couldn't open up a business account unless you had at least an Assumed Name, so I'm curious.

Hey @Rachel Brewster welcome to BP!  I opened the accounts under my personal name with a standard checking/savings account, however none of my personal transactions will be with these accounts, as they're set up just the property.  

Don't throw away your snail mail and pay attention to the "promotions" tab in your Gmail, including the ads.

Sometimes the best credit card signup bonuses are targeted (both paper mail and email) and will result in more bonus points than the offers you can find online.

Also, if you have a Chase bank account but you don't have one or more of the foundational Chase cards (Freedom, Sapphire Reserve, etc.), walk into a branch and let them know you're looking to open a new card.

Branches and bankers are obviously evaluated based on their ability to open new accounts, and they may be motivated to give you a special offer.

For example when my wife got a Chase card she got double the sign-up bonus in-branch than what was being advertised online at the time.

If they present you with just the commonly-available offers, let them know that you'll just open it online because it's easier and will result in the same bonus anyway.

If it looks like you're going to walk away, the banker may be able to give you a better bonus in order to not lose credit for your account opening.

Of course they may not have the authority to do so but it's worth a shot.

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