First of all, great Forum and very informative for a newbie like myself!
Question for the group if you please:
I am looking to buy my first investment property “no-money down”. My target market would be small multi-family rentals (2-6 units). No SFH rental interest due to low cash flow potential (and that’s if you have made no mistakes in your SFH calculations!). Not worth the trouble to me. Small multi-family seems to strike the right balance between a chance at higher cash flows vs. “biting off more than a newbie can chew”.
My profile in brief:
Excellent Credit (score 760).
At current job less than a year
No cash in the bank for down payments
But…here’s the twist: I have EXTREMELY high total credit line on 13 credit cards (amounting to 5 times annual salary!). As example, total cash advance potential is over $100,000.
Understand this could easily represent a double-edged sword if used incorrectly, but is there an intelligent way to incorporate these credit cards into buying property no money down? Example: use the cash advance for 20% down payment with 80% mortage thru a lender. Then…once property is obtained, generate a second 20% mortgage, secured by 20% equity, to pay off credit card.
if you do not own your own home (to live in), you are skipping a critical first step in your REI career (IMHO).
second, having high credit lines on cedit cards really means nothing (sorry to disappoint you) and inf fact, may HURT your ability to get a loan (lenders have assume you may max them out).
third, while there is a lot of creative fianancing going out on out there, lenders do look very closely where downpayments come from. Taking a cash advance on credit card is not going to be fooling anybody (I’m not a loan officer so maybe one of those guys could comment further); especially given you have no other assets/cash.
Getting loans for owner-occupied at 100% is a whole lot easier than investment property.
I do own a home so that step has indeed been taken (but also eliminates the owner-occupied investment possibility). Any thoughts about the feasibility of using relatively quick access to cash to purchase property at a discount (say, at 80% market value) and THEN going to a financial institution or broker to obtain what should be a straightforward 80% LTV loan to pay off the cards?
Would a sudden spike in credit card debt eliminate the possibility of getting a property loan - even though backed by the property’s equity?
Hello,
Alot of lenders nowadays look at seasoning of funds. My advice? Take a relatively high cash advance on the cc (20% of your LTV) and leave it in the bank for 60 days. This will satisfy lender seasoning requirements. Keep balances below 50% of your credit limit and you’ll be OK.
Regards,
Dave
the technique i prefer is to use cash advances to buy a property for cash, then get a home equity line of credit to pay the credit cards off, instead of a mortgage, to avoid paying closing costs. credit cards usually charge 3% for the advance, but that can be negotiable. another advantage to using a heloc is that you can access the equity for cash whenever you need it. plus, helocs are interest only, and if you pay all your cashflow toward the principal, you can have the property paid off in 7-10 years, depending on the cashflow and principal balance. the only disadvantage is a variable rate, but that shouldnt matter if you are paying the principal down.
p.s. everytime you pay towards principal, your minimum payment goes down, and your cashflow goes up, so if you pay all the cashflow towards principal, it will be paid off more every month.
No problem with obtaining a heloc if your credit report shows a sudden large spike in credit card debt?
It also seems this technique would leave the financing of each investment property as an “island unto itself”, i.e. with no other propery equities involved as heloc security. That seems a very good thing, keeping the financing straightforward and with no property connected to any other property. If one were ever to default, it would not affect any others.
You don’t like SFH, but if I were you I would take the $100k cash advance buy a SFH that is worth $100k that needs work for $60k put $20k into it and sell it for $100k. Pay back the cards, repeat as necessary.
I met a guy at my REI club last week that is doing just that with his credit card advances.
