Using 0% Interest CC's for Rehab Work

18 Replies

I am interested to know why more investors don't open CC's that have 0% interest for 12/18 months for rehab work on their investment properties. After listening to the first 335 episodes of the BP OG podcast, I have heard one guest cite credit cards as a feasible way to finance rehabs. Is there something I am missing? Are investors just looking to develop relationships with their private lenders and hard money lenders for larger rehab projects down the road? To me, it seems like a very reasonable way to pay as little interest as possible for the longest amount of time. 

I've done over 25 unit renovations with credit cards. Now I'm getting to the point where it's starting to impact my credit score due to high utilization so I'm going to refi 3 properties and pay off all the cards. I've never done a re-fi before-- It just is so expensive to do commercial financing.

Originally posted by @Jill F. :

I've done over 25 unit renovations with credit cards. Now I'm getting to the point where it's starting to impact my credit score due to high utilization so I'm going to refi 3 properties and pay off all the cards. I've never done a re-fi before-- It just is so expensive to do commercial financing.

YUP that can bite you when U go to refi.. 

Originally posted by @Jay Hinrichs :
Originally posted by @Jill F.:

I've done over 25 unit renovations with credit cards. Now I'm getting to the point where it's starting to impact my credit score due to high utilization so I'm going to refi 3 properties and pay off all the cards. I've never done a re-fi before-- It just is so expensive to do commercial financing.

YUP that can bite you when U go to refi.. 

Jay, I'm kind of worried about that. I probably should have done it sooner. I think we have real strong equity positions in the properties we are going to try to refi so I'm hoping that will help. Plan B is that if I'm unable to refi, I'll sell off my only SFR and then I can pay off over 60% of the credit card debt and then I'll try again to refi. Since I do commercial loans they don't focus on DTI, how much do you think my cc debt will hurt with commercial lenders?

Originally posted by @Jill F. :
Originally posted by @Jay Hinrichs:
Originally posted by @Jill F.:

I've done over 25 unit renovations with credit cards. Now I'm getting to the point where it's starting to impact my credit score due to high utilization so I'm going to refi 3 properties and pay off all the cards. I've never done a re-fi before-- It just is so expensive to do commercial financing.

YUP that can bite you when U go to refi.. 

Jay, I'm kind of worried about that. I probably should have done it sooner. I think we have real strong equity positions in the properties we are going to try to refi so I'm hoping that will help. Plan B is that if I'm unable to refi, I'll sell off my only SFR and then I can pay off over 60% of the credit card debt and then I'll try again to refi. Since I do commercial loans they don't focus on DTI, how much do you think my cc debt will hurt with commercial lenders?

I really dont know.  with my commercial banks fico was not the driving factor it was experience collateral protection IE equity and Character 

with gov mit backed loans they could give a rip about character its all about fico and DTI. Its why I sold all my rentals I bought with conventional financing back in 2004 2005 2006.. having so many loans my fico could hardly get above 700 even though I had never missed a payment in my life and I paid all my CC monthly and have for 25 years and NO other debt than car loan.. But I had 20 million in commerical debt so they did not care it was all equity and Character. So for me I just dont borrow money for rentals anymore.. I know most wont do that but rental income to me is not going to move the needle when your main income is real estate fee's and building homes etc hard to get excited about 200 a month :)

I do it all the time. It’s free money so why not? Actually they all pay you a percentage of what you spend to use them so that’s even better. I use those 0% for a year balance transfer/convenience checks citi offers a lot too. There’s a 3% service charge but I’m ok with that. They lend me up to 20k if needed. I’ve used these methods to help me scale up with the 12 properties I’ve picked up in the last six years. You gotta do what you gotta do to get RE! Lol

Originally posted by @Jill F. :
Originally posted by @Jay Hinrichs:
Originally posted by @Jill F.:

I've done over 25 unit renovations with credit cards. Now I'm getting to the point where it's starting to impact my credit score due to high utilization so I'm going to refi 3 properties and pay off all the cards. I've never done a re-fi before-- It just is so expensive to do commercial financing.

YUP that can bite you when U go to refi.. 

Jay, I'm kind of worried about that. I probably should have done it sooner. I think we have real strong equity positions in the properties we are going to try to refi so I'm hoping that will help. Plan B is that if I'm unable to refi, I'll sell off my only SFR and then I can pay off over 60% of the credit card debt and then I'll try again to refi. Since I do commercial loans they don't focus on DTI, how much do you think my cc debt will hurt with commercial lenders?

 I would call a mortgage broker and ask

Will take less than 5 mins

I just did it.   They said you can buy even single family home with a commercial loan

They don’t look at personal income.  They want 700+ FICO and the property income to pay the mortgage and expenses.   20% down 

So to me if your FICO is 700 you are all set in that area 

Every time I inquired about commercial loans on my SFR I got quoted much higher rates and loans that were amortized over 30 years but always callable every 5-10 years. Seems like an easy way to lose your properties during a liquidity crunch.

I use them, but I have the cash on hand to pay it if need be. You could plan to refi or sell off, but that could hurt you if the market dips. I also have my day job which could pay for it if need be. 

@Andrew Reis High credit card utilization brings your credit score down, which is one reason people may not use them. However, what I do however, is if I run up a big bill on the AMEX, I call them and ask them to increase credit line. If I had a $5k balance and a $20k credit limit, and then I run the balance up to $25k but get them to increase my credit limit to $100k, I haven't actually increased my utilization. 
Of course you can't do that indefinitely, and you still have to pay for the property itself and the labor, which you can't do with a card. So it may make sense to just put it all into one hard money loan.
The other thing to consider is if you have to pay a 3% fee to use your card, like with a lot of wholesale suppliers, and your rehab only takes 3 months, you are effectively paying 12% on an annualized basis for that money, which ends up being more expensive than a hard money loan.

I use my CC get my cash rewards/ air miles run them up during projects to conserve cash incase I find the next deal. Close a house pay them all to $0  keeps me from dealing with rehab loans as well, or gives me the time to get them processed.  My credit score does have a roller coaster look but I only worry about it when I am looking to really finance something for my personal life. 

I don't open new ones and try to stay away from that due to "new CC" and credit pull hits to credit score. 

Good Luck!

@Andrew Reis  

What most investors don't know is that you can also do credit card stacking in your personal name (also known as a ULOC or syndication). This allows you to get a much higher approval amount than just getting 1 card like most people do.

This credit card stacking can also be done in an entity. Lots of investors hold their properties in an LLC for example. This allows one to build business credit for their investment company too, allowing one to borrow even more in the future. Heck with a high enough W2 income one can also get access to a term loan within the business. It really is amazing how much one can leverage their personal credit to get access to a ton of financing.