Real Estate Agent · Jacksonville, FL · Member since 2015 · 1k+ posts · 1k+ votes
Has anyone used credit cards to fund the reno in a BRRRR?
I am using all cash and wanted to see if there was a way to further leverage?
I pay my contractors by check/debit, otherwise, they have interchange fees for their credit processing. They know they are going to get paid fast and by check/debit. This has helps move my projects up in priority.
About 1/3 -1/2 of my spend is on materials. Mostly Home Depot and Lowes. They offer "PRO" credit cards, but would I be better off using a standard visa/master card or is it not worth the trouble?
I use new credit cards with miles bonuses for rehab, then I pay them off when I refi the house (or sooner with cash)
I would not recommend using a credit card to pay for a reno unless you have the cash to match and you're only doing it to limit cash out exposure or looking to grab bonuses.
My suggestion would be to use cash if you can afford it. You will be getting it back eventually with a refinance, and you wont be paying interest on whatever money you do use up.
What is your reasoning for wanting to use credit cards?
I use new credit cards with miles bonuses for rehab, then I pay them off when I refi the house (or sooner with cash)
I would not recommend using a credit card to pay for a reno unless you have the cash to match and you're only doing it to limit cash out exposure or looking to grab bonuses.
If you're responsible with money - you should 100% look into Travel Hacking with credit cards.
It's almost never worth getting "store" brand cards. At a minimum, get a transferable points card/business card so you can use the points for anything (cash back, gift cards, travel, etc). Look up Travel Miles 101 or ChooseFI, they talk about traveling for free by putting expenses on credit cards and then paying them off responsibly.
I use new credit cards with miles bonuses for rehab, then I pay them off when I refi the house (or sooner with cash)
I would not recommend using a credit card to pay for a reno unless you have the cash to match and you're only doing it to limit cash out exposure or looking to grab bonuses.
My goal is to limit my cash outlay and use leverage. The plan is to increase the velocity of my money. I am running a 3-month cycle of buy-reno-refi (three-month seasoning). If I could eliminate the middle cash requirement, I could potentially increase the number of properties. Credit cards offer a level of flexibility that few debt products offer. The interest would be deductible as a business expense.
A travel bonus would be nice, but if I could get another house in the mix, that would be a windfall. My credit union allows a cash advance with no fees. The interest starts immediately, there is no float.
You should use credit cards but also have the cash to pay them off each month. Only use the cards for float and points. You also don’t want to have a large cc balance on the last day of the month before you apply for your refinance because it can hurt your credit score depending on your balance to credit limit. Using cc correctly will keep your carry costs low and give you points to help purchase more materials for your next project. It also is great for record keeping for Uncle Sam.
I've done a lot of the 6/12/18 months same as cash HD/Lowes cards. It's a great way to push the cash outlay out.
But I would NEVER want to pay the 18-20% interest on most cards, so I do make sure I have the cash to pay them off when they are due.
I have used no interest for appliances and not much more. I would need to bundle my purchases better.
I am a big fan of paying during the grace period and using the float. I really need 90 days to move the needle.
If I could borrow the money from a credit card for a similar rate to my ultimate loan, why not? There are no fees in or out and I can just move the money when I refi?
@Lesley Resnick
I use lowes, I have an LAR account. You get what's called QSP pricing on your large orders. Saves like 15-25% on everything, $20 delivery and no interest if you pay it within 30 days.
I am getting new fridges delivered for $325 and new ovens for $230, water heaters $250, Arcadia white shaker cabinets for $110 a box...nice LVP flooring for $1.00 a sq foot...just an example
I use lowes, I have an LAR account. You get what's called QSP pricing on your large orders. Saves like 15-25% on everything, $20 delivery and no interest if you pay it within 30 days.
I am getting new fridges delivered for $325 and new ovens for $230, water heaters $250, Arcadia white shaker cabinets for $110 a box...nice LVP flooring for $1.00 a sq foot...just an example
I am going to go over to REGENCY and set up an account.
@Lesley Resnick
The way that Lowe's has it set up is that each store competes with each other so it kind of makes it a little bit of a hassle because you really need to work from one Lowe's to get continuous good pricing.
Example: if your doing a lot of projects in Murray Hill I would not recommend going to the lowes on Lennox because they're not going to be as competitive as the lowes where you originally set up your account.. And you also need to have a list made up in advance with all the skew numbers that you need for the materials because it's not like instant you can't just call and say Hey I need a cheap fridge they're not going to do that it needs to be like a bulk order made in advance.
As soon as you take ownership of the property I would go in there and make my one big huge list with 30 or 40 items and give to the people at Lowe's because they need like a day to process and then you gotta get on their delivery schedule... So it takes a little bit of forethought and advanced scheduling on your part.
The way that Lowe's has it set up is that each store competes with each other so it kind of makes it a little bit of a hassle because you really need to work from one Lowe's to get continuous good pricing.
Example: if your doing a lot of projects in Murray Hill I would not recommend going to the lowes on Lennox because they're not going to be as competitive as the lowes where you originally set up your account.. And you also need to have a list made up in advance with all the skew numbers that you need for the materials because it's not like instant you can't just call and say Hey I need a cheap fridge they're not going to do that it needs to be like a bulk order made in advance.
As soon as you take ownership of the property I would go in there and make my one big huge list with 30 or 40 items and give to the people at Lowe's because they need like a day to process and then you gotta get on their delivery schedule... So it takes a little bit of forethought and advanced scheduling on your part.
That is great advice. Especially if they are going to deliver for $20. I have been holding back the appliance delivery until there is a tenant.
@Lesley Resnick. Combination of both suits me well. Have you listed to chooseFI podcast on credit card travel rewards? Opening just a couple new credit cards before a big flip can be really smart to get a future vacation paid - obviously want to pay them all down right away so you’re not losing those gains to high interest rates. #chasegauntlet
I use lowes, I have an LAR account. You get what's called QSP pricing on your large orders. Saves like 15-25% on everything, $20 delivery and no interest if you pay it within 30 days.
I am getting new fridges delivered for $325 and new ovens for $230, water heaters $250, Arcadia white shaker cabinets for $110 a box...nice LVP flooring for $1.00 a sq foot...just an example
@Lesley Resnick I use credit cards whenever they are accepted as long as there isn't premium charge for using them. I don't subscribe to using miles credit cards, because when you compare them to straight cash back cards, cash always wins in value. Too many restrictions on miles and cash in hand is more powerful (cash can be used for travel if so desired too).
Using a credit card you can get 1-5% back on everything you purchase. On top of that, the bill is delayed for a month so you can float the expense for 30 days without paying any interest.
Of course if you hold the expense on the card, then you get hit with finance charges. If you get a low introductory rate like 5%, then it may be a good way to leverage. You just want to be careful if your rate is closer to 15-20% range because the balances can escalate quickly. Plus they charge interest on interest, so it is even worse.
The other advantage of credit cards is they provide more buyer protection. It is very easy to reverse charges on a credit card. Cancelling a check or pulling back a debit card transaction is harder and requires more burden of proof.
The one thing I would not recommend is using credit cards when you don't have cash to pay the bill. Occasionally someone comes on BP talking about buying houses with credit cards or financing an entire flip with credit cards - having no cash to pay them. This is highly risky and usually it is done by newbies who have no experience, which doubles the risk.
1. Pay for materials at HD and other stores and pay off credit card balance every month. But this option as you mentioned does not satisfy your 3 month float.
2. Credit card with 0% purchase: these offers comes on new credit cards or targeted for existing card holders. This would be ideal. I have a few credit cards that I periodically get 0% offers. At one point one card was floating 50k of spend for 6 months. Monthly minimum payment is generally 1% (interest free)
3. Balance transfer checks: these are often send my credit card companies (some offer these online in your account as well). They do charge 3-5% fee upfront (charged to the account) and then a 1% min monthly payment interest free.
Having done all 3 options, you need to decide wha you are comfortable with.