free? Can you build a real estate portfolio with a zero-interest credit card?

Playing with a zero-interest business credit card is like playing with a torch in a hay-covered barn. Drop one and the whole place will catch fire. However, if you are disciplined and know what you are doing, they can be a valuable asset in helping you launch your real estate investing career.

Get 0% Business Credit Card

have location Related information on the Internet 0% APR Business Credit Card. Most offer 0% interest for 12-18 months. this Making them ideal for real estate projects that can be refinanced or sold, allowing you to pay off the card before interest kicks in.

but No Expect to receive hundreds of thousands of dollars immediately. Once you have used and repaid the initial amount borrowed, the lender will tend to Gradually increase the amount they can lend you. It’s not uncommon to get this Obtain first round financing of $50,000 to $100,000 with good credit.

Since the 0% APR expires in 12-18 months, it’s not a good idea to continue using the same card past the expiration date. quiteyou will have to Get a new card and enjoy the new 0% APR discount. The more borrowing and repayment cycles you go through, more Your credit will be extended.

If you’re like me and use a broker to help you apply for multiple cards, talk to your accountant about writing off the broker’s commission and any fees for using the cards as cash to make purchases or pay contractors.

painful trap

If you get several business credit cards at once, I find it difficult to keep track of each one, especially during a renovation.Each card requires a principal payment get paid Be on time, if you are one day late, say goodbye to your 0% entry period. You could find yourself paying up to 30% interest. This happened to me and I was only able to get some relief when I refinanced my home and paid off my credit cards in full.

Build a Real Estate Portfolio with a 0% Credit Card

Investor Rick Matos from Pennsylvania’s Lehigh Valley tells us bigger pockets How he used his credit card to buy an entire house in a rundown area of ​​Allentown, then fixed it up and refinanced it into a conventional loan.Rick’s house is a classic case study because the house he purchased was extremely Cheap – usually $10,000 to $20,000. However, soon after he refinanced them, the area went through a massive cycle of urban renewal and price appreciation, Rapid increase His rent allows him to pay off his mortgage and increase his net worth.

Detroit investor Ashley Hamilton has taken similar action, telling business insider (A story also circulates Yahoo!) How she purchased 35 units in 30 properties over 14 years using a 0% balance transfer credit card.

Hamilton’s blueprint is one that all investors can follow: She withdraws funds via a convenient check provided by her credit card company and deposits the funds directly into her checking account. After renovating and renting out her properties (like Matos, some of the homes were priced as low as $10,000), she used the rental income to pay off her balance transfer debt, cash out refinance, or tax refund. Hamilton’s tip was to open a credit card that offered cash rewards and a 0% balance transfer rate, giving her back cash to help pay off her loan or put it towards future projects.

Homes in the $100,000 range are ideal for today’s development sizes market

Using a credit card to build a real estate portfolio sounds like a move from the land that time forgot, namely after the 2008 financial crisis. then, low interest Rate and Burnout financial The economic collapse has banks looking to sell thousands of homes at bargain prices.

However, while this old-school approach may appear outdated due to high prices and low inventory, it’s not.In many cities you can buy a decent house for just over $100 $100,000. If you have a card with that much available credit, borrowing the remaining money to renovate and refinance will allow you to purchase many of these homes.

Alternatively, you can do the same thing the traditional way Mortgage (Assuming that the house needs moderate renovation), use a zero balance card for renovation and use cash flow You generate. this Requires expertise and market knowledge to ensure The card can be repaid in full During the 0% introductory period. However, if you are uncertain of How much does it cost to rent your house, I don’t recommend this.

Flip houses with a 0% credit card

house flipping It works similarly to buying an affordable home in a depressed market, then refinancing it and paying it off through rental income.However, if you’re flipping houses in a more expensive market, unless you have a big one With a 0% credit limit on purchasing an entire home, you must choose carefully how you use your card.

This is because some lenders may want to know your source of funds if you’re trying to get a mortgage, and they may reject the idea that you’re borrowing money for the sake of borrowing money.The solution is to deposit money Deposit into your bank account and let sit for three months, but you always working Race against the clock to use up your zero-interest introductory period.

The most obvious way to flip with a zero-balance credit card is to get a term mortgage on your home, then use the zero-balance card to pay for appliances and renovations. If you plan to keep the home after it sells Renovatedyou need to refinance the property or be confident enough that your cash flow will be able to pay off the credit card before the 0% introductory offer expires. Renovations and budgets are often overdue, as are listing and leasing properties, so consider all of these factors when deciding whether to use a business credit card.

0% Credit Cards and Short-Term Rentals: A Match Made in Heaven

Zero APR Credit Card Is the Perfect Tool short term rental Business. If you own an existing property or are arbitraging one, decorating your home to attract holidaymakers will involve spending on TVs, beds and decor. It could amount to a lot of money. However, the rental returns can be huge –more than three times Rent as a regular, depending on location – allowing you to pay off the card quickly and earn money High profits.

This is a trick I’ve used myself, and it’s relatively safe if you’re sure you can get the rent you need. In my case, before I spent a penny on the card, I signed a lease with an arbitrage tenant – we agreed to split the furniture costs.

Another thing worth studying is the installation accessory dwelling unit (ADU) located next to your STR or primary residence for additional income.These often include US$60,000 to US$225,000. Using a card to buy or renovate and pay it off through rent or refinancing can increase your long-term cash flow.

A new wave of compelling new Small house– Ideal for short term rentals – recently arrived exist arrive market, Starting at $20,000. this Making them ideal for credit card purchases since banks won’t touch such small loans.

final thoughts

if you No If you don’t have the security of a W-2 job or savings as a backup, you’re walking a precarious financial tightrope when you use a zero-interest credit card. In real estate investing, one thing usually holds true: things never go according to plan.

However, with a monetary buffer and an understanding of how to best deploy zero-interest credit cards, they can be a huge asset, allowing you to bypass hard money lenders and lay the foundation for financial freedom.

But please note: these instruments are wrapped in yellow warning tape. In fact, if you are an unorganized person or do not have an organized person working with you, then 0% interest credit cards are not recommended.If you don’t have a foolproof bailout strategy, e.g. Hurlock Or an emergency fund in case you find yourself unable to cope.

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Notes on BiggerPockets: These are the opinions written by the author and do not necessarily represent the views of BiggerPockets.