Using Credits cards to rehab

Rehabbing, Fix and Flip, Rental Properties
1

Can some of you share your thoughts and experience using credit crads to do rehab’s.

I’m thinking of use a 0% for 6 months credit card to purchase materials and use my cash to pay my help and holding cost. I will do this for the 1st two rehabs so that I can build up my free and clear cash.

Thanks
auggflo

2

I use my store cards all the time for materials (Home Depot, Lowes, etc.) They get paid off when I refinance the property. The guy I use for carpet gives me 90 days same as cash, except his office manager keeps forgetting that part LOL – he gets paid in the refinance too. I love to use other people’s money where I can.

Good luck to you.

3

Thanks Tami for the respond. I have those same cards in mind.

Any CON’s in using credit cards?

Thanks
auggflo

4

Read “Diane’s” blog at http://www.realestateventure.blogspot.com.

It’s a pretty good read and gives a couple of examples of how she did it…I also know that “black95gt” has effectively used zero interest credit cards for some of his REI…

Keith

5

the con is your need to have the $$$ squirrelled away Just in case that 6 months expires before you can refi, sell, or whatever. Otherwise, you know owe 6 months worth of interest at their crazy rate of 21% or something.

6

yes, i purchased my house and did my entire rehab (about $17,500) worth on my credit card. I just finished the house today (carpet was just layed and i now have it on the market. I have about 5 months to have it sold and for me to be paid so i can get the cards paid off before they go up to the 8 or 9% interest rate. So far it has been a good experience and is very easy to keep track of how much you have spent and where you are at on your budget especially nowadays with the online banking. I know i probably will not ever be able to buy a house and do the rehab on the CC again because you cant buy houses for $9,000 very often, but you can bet your money that i am going to try and get my credit raised to about $50-60 grand so that i can continue this way…saves alot of time on trying to do a traditional mortgage, plus there are no closing costs involved.

7

one thing i didnt do and hopefully this time it doesnt come back to bite me is, i didnt refinance the CC before i listed the house…you should do it for the fact that from my experience of trying to geta refi, it is hard to get somebody to do a loan when they know that you are trying to sell the house, or have tried in the past. I was approved and almost all the paperwork was ready to be signed, but after teh appraiser did his, work, it was noted that the house was on MLS within the last 6 months and the loan fell through. May be something to take note of…

8

Black congratulations on your completed rehab!

Thanks for the information in on the refi – it’s amazing what they come up with. We had a lender who totally blew it to the point of me pulling into the parking lot to sign the papers and my cell phone rings with: The lender “discovered” we weren’t going to live in it. Never did we indicate we were. We told the broker it was an investment property from the get go – this person just didn’t know what he was doing. We’re now working with a broker who specializes in real estate investors only. He’s a breath of fresh air for us.

I’m so impressed with your deal. Good going!

9

I just need alittle help understanding using your credit card for the down payment and then refinancing. I read DIANE’s blog and I like the idea. When do you refin? Do you go from a 90% LTV to 100 refin?

Thank’s
auggflo

10

you probably can do it, but i know alot of lenders wont refi. for 1 year after purchase. I was almost in a bind because of this as my first purchase was a fha loan witha $5,000 personal loan for the rehab. PLan was to rehab the house and refi. it to get the 2 combined and some CC debt eliminated, but Wells Fargo would not refi it for 1 year. I also ran into a couple other banks that said they would not refi it until i owned it for 1 year. One that will though is Ditech.com

11

When you shop around for your loans you should be asking for a “non seasoned, cash out” loan. If the lending institution doesn’t offer that program, move on to the next. “Non seasoned” is a very common loan program for investors who have owned their property for less than a year. If your broker doesn’t know the term, move on to another.

12

does a non-seasoned loan just mean that there isnt a penalty for selling or refinancing before 1 year? Also, when i listed this last rehab home, my realtor said that a buyer cant do an FHA loan because i havent owned it for a year, and they dont do loans for flippers. Does anyone knowif this is correct?

13

You shop a non-seasoned loan like you do all others. I never do loans with a any type of a pre-payment penality, this may cost me a quarter percent interest. Our last refi is a 6.25 30-year fixed. That’s not too bad.

I tend to buy and hold so I don’t know about the second part of your question. Borrowing money is expensive, it is worth your while to refinance a house if it’s on the market or will be soon? To me that is giving part of your profit away, but I don’t know your situation or methodology. My husband wants to get into the purchase, rehab, sell market – so I’m very interested in how you are handling your project.

Take care!

14

well i refi my mortgage and credit cards into a second mortgage through Ditech.com for like $200 but i am also paying like 8% interest on 90% LTV. This though is a rental property now. I dont know how refi. really work when you dont have a mortgage to begin with (buying it on CC). I suppose you just get a heloc or something. I am not planning on having to do this as i expect to have the home sold before my CC interest goes up to the prime in march or April.