Author Topic: Thoughts on a bit more creative financing for the next rental  (Read 1179 times)

Enough

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Thoughts on a bit more creative financing for the next rental
« on: October 13, 2016, 08:48:11 AM »
Background:
Currently have two rental properties and looking to purchase a third.  I have $5k saved up for the next property, which does not include my personal emergency fund or rental cash reserves.  I would need 20k-30k to purchase the next property.

I'm saving ~$2k/mo which would put the purchase date of the next property ~10 months out. 
My Chase Freedom card is currently offering a 0% APR (through dec 2017) balance transfer / cash advance for a 3% transaction fee.  I would be able to draw up to my credit limit, $22k.

Questions:
It seems viable that I could use this financing to scoop up another rental if I a deal pops up that is a home run.  However, I have never used an offer like this so I am not sure if there are any hidden fees to check or what to look out for. For example, I am not sure if the 3% fee is an upfront fee or if it is added to my cc balance at my regular 18%APR?  If it is added to the balance, are you allowed to pay off the higher APR balance first?

Enigma

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Re: Thoughts on a bit more creative financing for the next rental
« Reply #1 on: October 13, 2016, 09:42:00 AM »
I did almost the same thing...  Leveraging my 0%APR 18month 1.5% cashback Chase CC (received in May2016) while paying down my 5% mortgage.  Every purchase that I would have made with cash went onto the 0%APR card while I threw every dime towards my 5%APR loan.  Currently the card has about 19k on it with a 25k max while my loan has gone down by about 30k.  My credit has taken a ding every month...  Went from excellent to good credit a loss of around 80 or so points (800s to low 700s)

That aside your credit most likely wouldn't get the hit until you go to purchase your new property.  My cash advance on my card is capped below the max at like 5k.  Using a credit card however is still Russian roulette...  lots of fine print to read through.  I would be interested to know how this works out for you.  Maybe how I may play a future purchase

arebelspy

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Re: Thoughts on a bit more creative financing for the next rental
« Reply #2 on: October 23, 2016, 06:57:16 AM »
If that's the whole purchase price of the property, and there's no rehab costs, and you have healthy reserves, this works in theory.

If it's a down payment on a mortgage, it won't work (as they don't want those funds to be borrowed, and it could significantly add to your DTI).

In reality, it's probably too risky for me.  I've done some various credit card arbitrage, but you don't mention what your reserves are, besides "which does not include my personal emergency fund or rental cash reserves".

If you had the whole purchase price, say 20k saved up, and you decided to use a CC balance transfer to fund it for a year to purchase early, with those reserves as backup, okay, cool.  But without a huge cash cushion, if something goes wrong, suddenly you're paying 18% (or whatever).  Not worth it the risk of that happening, IMO.

Slow and steady wins the race. :)
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hoping2retire35

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Re: Thoughts on a bit more creative financing for the next rental
« Reply #3 on: October 25, 2016, 02:09:27 PM »
No.

I have heard many real estate investors and developers say they never mind to let someone else get a good deal.

You are playing the numbers; long term averages and strategies, not 'specials' that appear for some reason. Find an area with good cap rates and keep tabs with it.

thedayisbrave

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Re: Thoughts on a bit more creative financing for the next rental
« Reply #4 on: October 26, 2016, 08:02:55 AM »
Are you buying the property cash?

If no, then no bank will allow you to do this, as they look at your DTI as someone mentioned earlier. 

Either way, I wouldn't do it.  What's the rush? If you have to borrow on a credit card to buy the property, that means you can't afford it.  You can always pick up a side gig and throw that extra money to the property fund.