Maxing out credit cards for rehab?

Question

What’s up everyone. Looking for advice from those who have utilized credit cards for rehabs. I just closed on a two-family with a 203k loan— the banks money should cover a majority if not all of the first unit rehab and then I'll be moving into the second unit to finish the job with my GC via some sweat equity & hopefully some creative financing.

I have considered the Home Depot's Project Loan and HD credit card (thoughts?) but am leaning towards maxing out a traditional credit card or cards via 0% intro APRs and/or Balance transfers. Although I have done my research, these methods are fairly new to me so I do have some questions. I am torn between getting a Balance Transfer card > racking up my limit on my current CC > then transferring the debt to my second card in intro period OR getting a new CC with 0 % intro APR > use that new CC to pay my GC and fund rehab. For those who have done this which option would you recommend (0% Purchase vs Balance transfers) and how would you advise going about it?

I currently only have one CC and I have read how people use multiple cards but I assume they’ve obtained them over time... Obviously my plan is to aggressively pay down the debt from the rehab, whether it comes from a new 0 % purchase card or a balance transfer card, then after getting the debt down shoot to do get a third balance transfer CC before the intro period expires to avoid any interest on the remaining balance. Repeat the process and obtain more cards as I acquire more property’s/rehab projects. This all sounds good in theory but I do feel like I am missing something... Would you do anything differently?

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My main concern with this is jeopardizing my chances of a refi post renovation and not being able to qualify for another CC (to carry remaining interest load if necessary). I am confident I can get the debt down enough to ease my ratios, but I will be utilizing most if not all of my available credit in the beginning and know that can impact my credit score... I am hoping any effect on my credit can recover within my rehab-to-refi timeframe— this is my first property so I anticipate the additional credit account will mitigate at least some of the damage from the high credit utilization rate.

My primary goal is to finish the rehab in my unit in 6-12 months, cash-out refi into a conventional so I can utilize forced equity to cover existing debt, and move onto the next property/house-hack. Based off my numbers— @ 80 % LTV I should have 40K in equity to play with so I am hoping to get creative with the rehab, then cash out refi for any outstanding debt and/or use HELOC for the next property.

Let me know your thoughts and thanks in advance.

Steve

Greg Dickerson · Answer

If you can get the credit cards paid off before interest kicks in then you are golden. Otherwise the interest will eat you alive and you’re much better off borrowing private money or a hard money as opposed to using credit cards.