Credit Cards, 0% interest, balance xfer & playing the game....

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Credit Cards, 0% interest, balance xfer & playing the game....

David Huynh
Investor · St. Paul, MN · Member since 2014 · 109 posts · 37 votes

Hey hey hey!

I'm looking to get feedback on people who have successfully done this. I've never credit card hacked (unless you call what I did hacking) but I'd like to learn more about it. 

It started when I bought a property and all the banks rejected financing it, since over 55% of them were not owner occupied. So I went all in and used the checks that my credit cards were sending me, along with my savings to close on the property (deal worked out wonderfully and it is one of my best properties today). 

So, I found another deal but cannot find 25% for the down-payment. I refuse to leverage any of my properties since they cash flow well and are all performing. Have any of you had 5-6 credit cards with 10K+ available balances that you've taken advantage of? Did you hack or get around this well? Walk me, through the process. 

My thought process is to loan myself 30-35k for the downpayment at 0% interest for 12-18 months and then pay it all back/off. The only charges are the 3-4 points upfront. 

Shoot holes in this thing and teach me or talk to me of the pros/cons.

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Steve HodgdonPro Member
Investor · Novato, CA · Member since 2015 · 433 posts · 321 votes
10y

remember in 2006 when it was sunshine every day?

remember in 2008 when most mortgages were under water?

What could go wrong today? Could you maintain your payables on 1/2 of your income?

I owned a property that went from 4.2 mm to 2.5 in that time. I had to pay in to keep it for 7 years till the market turned. Can you weather that storm with this strategy?

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  • Steve HodgdonPro Member
    Investor · Novato, CA · Member since 2015 · 433 posts · 321 votes
    10y

    remember in 2006 when it was sunshine every day?

    remember in 2008 when most mortgages were under water?

    What could go wrong today? Could you maintain your payables on 1/2 of your income?

    I owned a property that went from 4.2 mm to 2.5 in that time. I had to pay in to keep it for 7 years till the market turned. Can you weather that storm with this strategy?

    1Reply
  • David Huynh
    OP
    Investor · St. Paul, MN · Member since 2014 · 109 posts · 37 votes
    10y
    Yup, issue is downpayment upfront.
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  • Denice S.
    Specialist · Buffalo, N · Member since 2013 · 59 posts · 46 votes
    10y

    Hi David,

    I've used this method successfully 7-8 times over the past 10 years when flipping and can share my experience and methods. 

    I have a good credit rating and I have 6 cards from different banks each with 8-10k cash  options. These cards are never used to purchase items, they are only used for taking money.  Having cards from all different banks is essential for mitigating the risk of worst case scenarios (i.e...house sits on market or flip is a FLOP).  If all of your cards are with just one or two banks, your financial risk increases because you cannot transfer balances within the same financial institution...in other words limited bail out strategy.  So, hopefully, your cards are spread out amongst Discover, Chase, Wells Fargo, BOA, Cap 1 etc...

    The pro's of using credit cards are all you imagine

    • Easy Access
    • Usually deposits within 10 days of request
    • Low cost (mine are 2-3%) for 15 or 18 months
    • The 2-3% fee is rolled into the balance, so I don't really even pay that up front.

    The cons I've found to be as follows:

    • After about 40 days of cashing checks, my credit score drops about 50-75 points and it takes 4-6 months for it to rebuild after the balances are paid. --This could be difficult for a buy and hold investor.
    • Each card requires a minimum monthly payment of around $150-250 (depending on balance). Multiply by 4 or 5 and that could be over $1,000/month so you'll need to have money to cover these MINIMUM payments. ---Buy and Hold, these would cut into your cash-flow.
    • One late payment and your promotional rate could end.
    • If you don't  pay the balance owed within the timeframe you face enormous rates (15-25%)

    I've never gotten into trouble.  Mostly because my flips have been successful but also because I learned the rules/terms of each card and had a plan to carry these high balances.  These are my golden rules... 

    • Never make a purchase on a card while a promotional cash advance offer is in effect.
    • Have money in reserves to pay the monthly bills and Pay on Time - Late payments can end the low promotional rate.
    • If I need 40k for a flip (10k from 4 cards)...I deposit them all the same day. 
    • I don't proceed with deals until I know the money has dropped.  Credit card companies can deny these checks.
    • I Never use all of my available offers at the same time because I might need to transfer a balance in 15 months if something awful happens.  Remember, your credit rating will lower...so you may not be able to apply for new cards.  Keeping 2 out of 6 cards open for a balance transfer later could really save you from disaster.

    My business model would not allow for a 40-50k loan on a buy and hold property with essentially a 12-15 month balloon without first having that money in reserves to begin with.  But those are my numbers...maybe it could work for you, just be sure to read all your terms carefully and consider the "cons" I've outlined.

    Best of luck. 

    1Reply
  • Jacob Sampson
    Investor · Topeka, KS · Member since 2015 · 1k+ posts · 1k+ votes
    10y

    I would echo @Steve Hodgdon and @Denice S. I think they gave sound advice/examples.

    Keep in mind that my opinion is coming from someone who is pretty conservative.

    It sounds like you have made some great progress into REI. Don't put that progress at risk for the sake of getting another unit under your belt.

    Remember, it's far more important to protect your downside than it is to maximize your upside. That's true for poker, for stocks, and true for REI. You'll have an opportunity to buy 20 of these deals, no individual option is that big a deal. Play within your bank roll, if you aren't prepared to take advantage of this particular deal then just pass and get prepared for the next deal.

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  • David Huynh
    OP
    Investor · St. Paul, MN · Member since 2014 · 109 posts · 37 votes
    10y

    @Denice S. Thanks for the response, very detailed and well laid out. I did search it on the menu bar and found another gentlemen who successfully had done this up to 70k. 

    @Jacob Sampson Thank you for looking out too for me. 

    My properties and employment can and will cover paying for the whole downpayment over that short span of time. This isn't a grand slam deal but a lot of investors would jump on it if it were available or on the MLS. The idea would be for me to pay all of the credit cards used 3 @ 10k to cover the initial downpayment (50k) or so. I do always want to keep my doors open on how I fund the deals, the hard money/private money route was just too expensive and probably more of a hassle than paying the 3-4 points upfront (3 points on 30k = $900).

    If anyone else has additional ideas or has successfully done this, please chime in. 

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  • Joshua Malik
    Flipper/Rehabber · Racine, WI · Member since 2016 · 41 posts · 26 votes
    10y

    If you can avoid using more than 30% of your credit limit on any individual card, then you won't see as big of an impact to your credit score.  

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  • Michael Ahrens
    Pemberton, NJ · Member since 2015 · 17 posts · 3 votes
    10y

    good info so far. does anybody have personal experience using a service to aquire and manage your credit "pool"? for example WCAP

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