New Investor...has cash; and question about refinance.

Hello members,

This is my first post of hopefully many in the future (I guess fewer is better). To start, I am a new investor and I secured $18,000 at 4.99% through a credit card promotion. The interst is fixed for about a year. There are a couple of properties I have my eye on. Due to the promotion, I have to move fast. One property is listed for 24,000, my idea was to offer 14,000. (if all is well) The reason why I secured the money before i determined if this is the property to throw the money at was because I wanted to have the leverage of offering cash. If I waited then it would have cost me several days to have money on hand.
To the hypothetical. I purchase the property and attempt to refi after six months…is it correct then to get a new apprasial, then refinance? Since my debt will be with credit card, are there any intricacies in doing the refinance? How would the experienced investor handled the situation?

Situation? What situation? An experience investor would understand how to value the property and not purchase it with a credit card “hoping” to refinance in six months. Slow way down. In this market, you do not have to move fast. Sorry for the bad news, but if all you have is a credit card, I suggest you are dangerously undercapitalized. This is folly.

I think first you must learn how to evaluate a property. How do you know that your $14k property isn’t fairly valued at $10k (plus repairs)? Forgetting about the appreciation necessary to do a refinance, will this deal provide enough cash flow to enable you to hold it for years? Where are your numbers? What if you can’t refinance in six months and your credit card interest rate skyrockets? Do you have the wherewithal to make the payments if you lose a tenant? Even in the heyday of free money, there was not a bank in the world that would do a refinance here.

While I appreciate your exuberance, if you must focus on real estate, I suggest you consider some less risky means involving less leverage.

Agreed with the above post - buying real estate with a credit card seems like a terrible idea, unless it’s a just a ridiculously killer deal. Even then, I’d be careful. CC companies are not in the business of giving out cheap money - what will your rate be after the promotional period.

You have to do the math and figure out if it’s worth the risk. Are you sure you’ll be able to rent the property? If you rent it, what will your cashflow be every month? What rate of return is that? What will happen to your cash flow when the interest rate on your CC jumps to 12%? to 15% and you can’t refinance?

The rate is good, but the killer will be the payments if you default… and the ticking clock. You should talk to a lender about the situation and see what they reccomend.

I am guessing the payment on the card will mess with your Debt to Income numbers and lower your FICO, making a refi more difficult.

Six months seems like a short seasoning period to get a refi done. I have usually had to wait a year.

It is not unheard of to use credit cards for financing, but if you are starting out you are at a much higer risk since your experience is low.

I have heard of Credit cards being more typically used to finance repairs on a place, provided the terms are acceptable.

If you have little “real” capital, then you should try buying properties on lease options, land contracts, or subject to.

You can only take the money out on the card for one house at a time, if you learn these other methods and can properly evaluate the properties, you can pick them up as fast as you want, with little or no money and limited risk to your credit.

I tend to agree with above posts

Risky Risky Risky :banghead

Facts you should consider are all posted above
I will only add a few more

It is becoming very hard to re finance anything considered INVESTMENT property
even with a long and proven track record

Most banks don’t even want to know your name unless your owner occ

and even if you can get financing your going to pay a good interest rate on it these days

Hard cash seems out of the question on such a risky venture as one wrong move and they will default on you in a new York second!

I don’t mean to be in the wrong place But if your 18 K cash out was at 4.99 your not looking at that good of a deal
with a real good Fica score there are deals out there at 0.0% for a year
I use them> LOL
But never to Buy with

anyway Like the person above said
You seem to be in to much of a rush> this business is not something one handels in a hurry
Rushing usualy leads to mistakes and those cost serious money when made

Do your Homework First!

I didn’t realize I had responses. Thank you all. And I must say I feel validated because all of the good advice that everyone mentioned…did catch up with me and I cancelled the CC transaction last Monday. For all of the reasons I just read…so I appreciate the blunt honestly ESPECIALLY since I did not go through with it. Plus now I know I am thinking straight and on the correct lines.

To keep you updated…I am in the process of getting a cash out refin on my home for a down payment.

In Johnooch’s defense, there is no difference in buying a house on a credit card for 1 year @ 4.99% and buying that same house with hard money at 15% for 6 months except he is paying 4.99%. I say it all depends on his exit strategy. If he knows the value and he can move the house in 6 months then he is way ahead of the curve.

My initial thinking was that I’d be able to refi after six months…but then further thought led me to thinking that the debt might hinder my ability to refinanced into a stable interest rate. The unknown is that since this is my first time my exit strategy that I felt I had just wasn’t a guaranteed exit strategy.

It would depend on how strong your credit profile is (credit score, cash on hand, debt to income, etc). If your credit profile is strong you should be able to refinance, especially if you have a lot of equity in the house.

Credit score is good…I got the score from experian and transunion…865 and 878 respectively…don’t remember the model they used. I was more worried about the impact the 18000 on my credit card would have on the credit score…the limit is 20000. At first I figured there should be enough equity and i’d get the value to rise…but again…there was no absolute guarantee.


Another voice of caution…I just paid off a 4.99% credit card that I had used for rehab. The next month I got a letter from the credit card company raising the rate to 16.99%. I can opt out of the card, but otherwise can’t negotiate that rate down. My credit scores are pretty good too.

I would try to maybe borrow only the downpayment on the card, and finance the rest long term (Minimum 5-year rollover) with a bank. Then if you can’t sell the property you can at least rent it out and handle the payments. Your credit score will take a hit from borrowing the whole big chunk on the card, but a bank loan with regular payments will only help you borrow in the future.

Also we have a second home and I called the bank in that town about refinancing. "We’re not making any loans in that tract, " the banker said. “We don’t have any investors right now to sell the loans to, so we’re not lending.”

So don’t count on a re-finance either. If you always plan for the worst possible case…Can’t sell it, equity going down, can’t refinance it, gotta rent it out…then you will hang on to your property while others around you get foreclosed on. Keeping property for the long term can be safe and lucrative.


There’s still a couple of other questions regarding how many other credit cards you have. I have 4-5 of them with credit limits in the 20k range and currently have one fixed at 2.99%. I had one at 0% that recently expired and had to roll it over into another one at 2.99% as the banks haven’t been good about doing 0% anymore. I still get offers all the time on the other cards to roll the money over. This was a strategy I used when purchasing a car.

10-14k isn’t very much for a house, what kind of rental numbers were you looking at? Most banks don’t like to touch things for less than 100k, but you might be able to get it done with a local bank. The thing with such small amounts is that it might cost you 2-3k in closing costs alone which makes the APR very high.

If your going to list this unit as your home or a second home?

I would check with the banks first to see what they are aproving on second Home loans?

It doesn’t hurt to talk to the bank ahead of time
I have gained much insite by speaking to them beofre i pull the trigger.

if you can pull it off as a primary or secondary home you should be able to finance out in time

then Using your card to start the deal wouldn’t be so scary?
at least you would have a back door way to get out from under the card before the time is up
may not be the best exit , but it would help me sleep at night