I have been an agent for the past 5 years now and started educating myself on flipping a couple of years ago. I have read as many blog posts, books and watched as many YouTube videos that I can on the subject (No guru youtubers). I now have enough cash reserves to buy a house cash in my market. However I do not yet have all of the money needed to fund the rehab portion of the deal. This is my question to you...do I wait to save up more cash to fund the whole deal including the rehab? Or do I utilize 0% APR credit cards that only require the minimum payments without interest for 15 months? Specifically looking at the Chase Freedom Unlimited card. I would have enough cash to cover the minimum payments each month and then pay the whole card off once we close on the deal.
What is your opinion? Thank you in advance for your responses!
Specialist · Delran, NJ · Member since 2016 · 2k+ posts · 951 votes
6y
When you say you have cash reserves how much are you talking? When you say it's enough for houses in your market how much do they go for? How much of a line can you get on the cards? Two things to consider:
1) The reason I ask is because you don't want to get stretched thin on your first flip. They tend to cost more in repairs than expected, fetch less than expected and take longer than expected. While it's cheaper than hard money if you stay in budget, you'll need a plan if you go over so it may be beneficial to go hard money and use your reserves for overruns and emergencies.
2) Will you be satisfied only working on a single property to completion if another opportunity arises while you're working on the first? If not you may not want to tie all your money up in a single property which could take far longer than expected.
Flipper/Rehabber · Member since 2020 · 57 posts · 36 votes
6y
@Johnny L. Many of us early investors run on a roller coaster credit score.Scores go down as usage goes up,paying them off after the sale makes the score go back up.Definitely something I can live with but something to consider.If your not an LLC make sure your tax pro says your OK .Capital gains can bite you.
If you can do it,go for it after the first it gets easier.Good Luck!
@Odie Ayaga This guy is spot on. Hit on every lesson I learned on my first flip.. No guarantee you sell within 12 months. Paying cash for the house limits your from grabbing other deals. It will definitely cost more than you think on your first house. It also won’t sell for what you think on your first one.. Don’t get stretched thin!
That is why id rather use a credit card that gives me 15 months than a hard money loan that only gives me 12. Im not concerned with grabbing deals my first year. My goal is actually just to flip one. After that I can see what you mean about getting my cash tied up! In your opinion what is the best option for me? Hard money will only lend me a minimum of $75k. I don't need that much money and id hate to pay interest on money I don't need. Is it best for me to save up another year or so so I can fund the rehab as well and then once I have a couple deals under my belt use a hard money lender? Thank you for your advice!
@Odie Ayaga This guy is spot on. Hit on every lesson I learned on my first flip.. No guarantee you sell within 12 months. Paying cash for the house limits your from grabbing other deals. It will definitely cost more than you think on your first house. It also won’t sell for what you think on your first one.. Don’t get stretched thin!
@Johnny L. Have you talked to any of your local community banks or credit unions? Sometimes they are a little more flexible than your larger banks. And as you grow, you'd probably want to look at opening some real estate investing lines of credit.
Ive spoken to a couple of them. Youre right though I am going to speak with some more and see if any of them can allow me to get a mortgage on a property and pay it off early. That is really the ultimate way I wanted to do it so I will keep trying that route and if all else fails I will go back to the credit card strategy. Thank you for your advice Nicholas!