Using Cheap Credit (<4% Interest) to Invest

[bb11]

I've been having a discussion on the "not paying off mortgage early" thread, but didn't want to derail it so I'm creating a new one.  My general theory is that there is nothing unique about mortgages, and we should be using any cheap loans we can get in order to invest extra money. I've been using 0% APR credit cards and balance transfers, which can let you use a banks money for 4+ years before needing to pay much of anything. Here is the quoted discussion below:

ME:

Does the fact that it's mortgage debt change anything, or is the rate all that matters? For example, should any debt under 3% not be paid off past the minimum payments? 4%?

No most debts under 5.5% should not be paid off currently see below. and if you havent maxed tax advantaged space dont pay off debts under 7.5%

Current 10-year Treasury note yield is ~2.5%.  See           
   http://quotes.wsj.com/bond/BX/TMUBMUSD10Y         

It is just about the gap in the difference between investment returns and mortgage rates.   Whether you itemize on your tax return or not may also impact the size of your gap where it matters.

ARS had a good thread.  If I recall, within 2%, it is up to you what you choose, more than 2% gap (mortgage lower) and you definitely want to stay invested versus paying off mortgage, unless you have other non-monetary reasons in play.

ME:

Thanks for the responses. So what I am seeing is any time debt is available under 5%, you ought to take it and invest while just making minimum payments? Because for the last year I put all expenses on a credit card at 0% promo APR while paying the minimums and investing what I would have paid the CC company, and then at the end of the 12 month promo period I did a 0% balance transfer fee to another card. I am currently at a $5500 balance with 14 months left at 0%, and I already have another card picked out with a 0% balance transfer fee that I could put the balance on for another 15 months. Eventually I will have a $15k or so balance that I'll need to pay off in full in the fall of 2019, but in the meantime I'll have gotten 3 years of investing returns without paying a dime of interest.

Why are so few people doing this? Is it just because it's a small amount of money compared to the mortgage? At 10% returns I'm already making $550 a year in free income using this method, and it's very simple to do. Car loans are another obvious candidate, as you can often get 0% interest. The same could be said for undergraduate student loans. Most of them are 3% interest or so (if federal) and the interest is subsidized until after you graduate (meaning you can go 4-5 years at 0% interest. If you don't need the money to actually pay tuition, why not loan up to the hilt and invest it at all? Just curious why it's typically only mortgage loans where people recommend investing instead of paying more on low interest rates.

Why aren't more people doing this?

1) Most people live paycheck to paycheck, investing is a foreign language.

2) You are betting that in 3 years you'll be able to sell the stock for a profit.   In 3 years you might be able to do that.  Or the market might be down 50% and now you've got a whopping big credit card bill at 20% or more.  Won't take long to wipe out any profits at that interest rate. 

3) The more you do this, the harder it is to get a great deal on the next 0% card.  Or to get one at all, because your % of available credit in use gets higher and higher.

4) Do you really get 0% interest and 0% transfer fee with your new card offers?  All the ones I ever see want 3% or more up front as a fee, then 0% for many months afterwards.   

1) Most people live paycheck to paycheck, investing is a foreign language.

Well yes of course. I'm referring to people on MMM. I understand why most of society is not doing this. The median net worth in the US is ~$100k. People aren't investing. But I only really hear taking advantage of cheap credit in reference to mortgages on MMM, even though it shouldn't matter what loan you use.

2) You are betting that in 3 years you'll be able to sell the stock for a profit.   In 3 years you might be able to do that.  Or the market might be down 50% and now you've got a whopping big credit card bill at 20% or more.  Won't take long to wipe out any profits at that interest rate. 

It's true the markets could be down at that point. Of course that's true for any investment. I won't have a whopping credit card bill either way though. For two months or so before the final bill is due you just save your cash instead of immediately investing it. The cash flow from work will cover the bill, I'm not going to sell any investments or anything.

3) The more you do this, the harder it is to get a great deal on the next 0% card.  Or to get one at all, because your % of available credit in use gets higher and higher.

This isn't true. I'm talking about opening 2 extra cards over 3-4 years. Credit churners (a group which I am a part of) open many more cards then this in a shorter time span.

4) Do you really get 0% interest and 0% transfer fee with your new card offers?  All the ones I ever see want 3% or more up front as a fee, then 0% for many months afterwards. 

Yes. Here's an example. Open this Citi card: https://tinyurl.com/lg9y673
That gives you 21 months of purchases at 0%. Then open this Barclays card with a 0% balance transfer offer and 0% promo APR for 15 months: https://tinyurl.com/h8qvrbr
Transfer your balance on that, then when 15 months are up transfer your balance to the Chase Slate 0% balance transfer card and 0% promo APR for 15 months: https://creditcards.chase.com/slate-credit-card/

Boom. You've just paid for all of your expenses (besides probably rent) with someone else's money for 51 months (4.3 years) without paying a dime of interest, meanwhile all of your cash is invested. If you run say $7k of non-rent expenses per year like me then the average balance on your card over that time was about $15k, meaning over 4 years at 10% compounding you made about $7k in extra income with this method. In the last 3 months before the final balance is due you just save your cashflows to pay off the card.

What am I missing? Why not take advantage of a 0% loan, when this whole thread is advocating investing money rather than paying a 4% loan down?

so the game youre playing used to be popular when fixed interest rates were in the high single digits to low double digits b/c guaranteed return.  And i dont remember who one of the main players in that was but he pokes his head in from time to time.  He doesnt play this game anymore.  using it to invest is treading on a very slippery slope b/c as SwordGuy stated you cant be sure those cards will always be there.  if you want to start another thread on this topic go ahead but dont derail this thread - its purely for not paying down your mortgage. 

https://www.fatwallet.com/forums/finance/813161

Here is secondcor521's thread from back in the day on how he took your idea to extremes.  but he was using fixed interest return whch doesnt exist like it does now.  i'm all for a thread on discussing this and looking at the risks.  i see them as quite steep.

Hopefully that is not too hard to follow. What I'm hearing as the biggest objection is just that there is risk of not being able to pay off the final bill, and getting stuck with the high interest loans. It's possible but I think very unlikely.

1. I am paying off the final bill with cash flows from the previous few months of work. I am not depending on selling any stock, so there is little risk of needing to sell at a loss.
2. If I were to say get laid off as the bill was coming due, I could sell stock if it were an attractive environment for doing so. I can also pick up a service job pretty easy that would pay $20-25 an hour and allow me to build up cash.
3. If I am totally unable to pay the final bill, and i can't find a 0% balance transfer card, I can always do a transfer to a regular fee card. After 4 years I'd have a $28,000 balance or so, meaning a 3% fee transfer costs $840. That would suck, but it buys me another 15 months to get the cash flow to pay the bill off, and it comes nowhere near the $7,000 or so I already made on the investment.
4. Only if I am laid off, can't find another job to come up with the cash flow, can't sell my stock, and can't qualify for a balance transfer do I ever end up paying the ridiculous 20% APR's. All of these events could occur in a depression-like environment, but even still we're talking about a non-catastrophic amount of money. It would still take 1.5 years at those rates to wipe out the investment gains.

So I ask you, should we be taking advantage of cheap credit in other forms to invest extra money, rather than just mortgages?

[boarder42]

Seconcor521 sees this hopefully.  he was leveraged at 540k on balance transfers back when you could get CDs for 5% ROI. 

i mean on a micro scale trying to squeeze an extra few cents out of the market, its hardly worth the time or effort if not done on the macro scale.

much more easy money can be made with CC companes.  see selling tradelins or CC travel hacking.  both 10x more lucrative than the level at which you're talking about using your credit with balance transfers on a microscale IMO.

[bb11]

Seconcor521 sees this hopefully.  he was leveraged at 540k on balance transfers back when you could get CDs for 5% ROI. 

i mean on a micro scale trying to squeeze an extra few cents out of the market, its hardly worth the time or effort if not done on the macro scale.

much more easy money can be made with CC companes.  see selling tradelins or CC travel hacking.  both 10x more lucrative than the level at which you're talking about using your credit with balance transfers on a microscale IMO.

I agree this is not a giant money maker, but the example I posted made $7k or so over 4 years. The only work was opening 2 extra credit cards over those 4 years. It's less than an hour of work for $7k. I don't see how the two alternatives you proposed are that lucrative, and I do credit churning as well (albeit I don't manufacture spending that much).

[boarder42]

Seconcor521 sees this hopefully.  he was leveraged at 540k on balance transfers back when you could get CDs for 5% ROI. 

i mean on a micro scale trying to squeeze an extra few cents out of the market, its hardly worth the time or effort if not done on the macro scale.

much more easy money can be made with CC companes.  see selling tradelins or CC travel hacking.  both 10x more lucrative than the level at which you're talking about using your credit with balance transfers on a microscale IMO.

I agree this is not a giant money maker, but the example I posted made $7k or so over 4 years. The only work was opening 2 extra credit cards over those 4 years. It's less than an hour of work for $7k. I don't see how the two alternatives you proposed are that lucrative, and I do credit churning as well (albeit I don't manufacture spending that much).

i MS 100k or more per year.   I already get turned down for CCs and 0 balance transfer cards are usually not big in points.  Barclays and discover are the cards worht the most in Tradelines.  i make 600 a month on my 3 year old barclays card.  and barclays doesnt really allow more than 2 cards open at a time.  you're chasing pennies when there are thousands of dollars to be made.

i also keep my citi allowable credit maxed out on cards that can be used to sell tradelines.  i'm talking 20-30k a year in income here not sub 2k.

[bb11]

Seconcor521 sees this hopefully.  he was leveraged at 540k on balance transfers back when you could get CDs for 5% ROI. 

i mean on a micro scale trying to squeeze an extra few cents out of the market, its hardly worth the time or effort if not done on the macro scale.

much more easy money can be made with CC companes.  see selling tradelins or CC travel hacking.  both 10x more lucrative than the level at which you're talking about using your credit with balance transfers on a microscale IMO.

I agree this is not a giant money maker, but the example I posted made $7k or so over 4 years. The only work was opening 2 extra credit cards over those 4 years. It's less than an hour of work for $7k. I don't see how the two alternatives you proposed are that lucrative, and I do credit churning as well (albeit I don't manufacture spending that much).

i MS 100k or more per year.   I already get turned down for CCs and 0 balance transfer cards are usually not big in points.  Barclays and discover are the cards worht the most in Tradelines.  i make 600 a month on my 3 year old barclays card.  and barclays doesnt really allow more than 2 cards open at a time.  you're chasing pennies when there are thousands of dollars to be made.

i also keep my citi allowable credit maxed out on cards that can be used to sell tradelines.  i'm talking 20-30k a year in income here not sub 2k.

"You're chasing pennies when there are thousands of dollars to be made"

The example I posted (and just told you about) makes $7k..... I don't know what you're talking about.

This is the first I've heard of tradelines. I'm interested in looking more into it. MS spending has seemed fairly difficult to me at more than a small level, but I'll do some more research. No matter how good these ideas are though, unless they prevent doing 2 balance transfers over 4 years I'm not sure why you're downplaying making $7,000 for an hour of work (assuming I'm analyzing this correctly).

[boarder42]

Seconcor521 sees this hopefully.  he was leveraged at 540k on balance transfers back when you could get CDs for 5% ROI. 

i mean on a micro scale trying to squeeze an extra few cents out of the market, its hardly worth the time or effort if not done on the macro scale.

much more easy money can be made with CC companes.  see selling tradelins or CC travel hacking.  both 10x more lucrative than the level at which you're talking about using your credit with balance transfers on a microscale IMO.

I agree this is not a giant money maker, but the example I posted made $7k or so over 4 years. The only work was opening 2 extra credit cards over those 4 years. It's less than an hour of work for $7k. I don't see how the two alternatives you proposed are that lucrative, and I do credit churning as well (albeit I don't manufacture spending that much).

i MS 100k or more per year.   I already get turned down for CCs and 0 balance transfer cards are usually not big in points.  Barclays and discover are the cards worht the most in Tradelines.  i make 600 a month on my 3 year old barclays card.  and barclays doesnt really allow more than 2 cards open at a time.  you're chasing pennies when there are thousands of dollars to be made.

i also keep my citi allowable credit maxed out on cards that can be used to sell tradelines.  i'm talking 20-30k a year in income here not sub 2k.

"You're chasing pennies when there are thousands of dollars to be made"

The example I posted (and just told you about) makes $7k..... I don't know what you're talking about.

This is the first I've heard of tradelines. I'm interested in looking more into it. MS spending has seemed fairly difficult to me at more than a small level, but I'll do some more research. No matter how good these ideas are though, unless they prevent doing 2 balance transfers over 4 years I'm not sure why you're downplaying making $7,000 for an hour of work (assuming I'm analyzing this correctly).

1. i cant open any of those cards b/c the cards i choose to open get me points and then get put into a system to continually make me money thats guaranteed. your 7k is only guaranteed in the assumption on market returns which is based on 30 year returns.  not 4 year returns.
2. you make 7k over 4 years - thats 1750 a year.  the cards i sign up for in lieu of that get me more points and at most banks my credit is already maxed out meaning i've got as much credit as citi and barclay will give me b/c of tradelines. Higher credit limit = more money selling lines.  i make over 3k a month selling AU spots on my cards. 

3 putting 1 and 2 together they both cant perpetually be done even if the credit cards were availble.  so you're betting on the market out performing to leverage some money for four years.  may work out the first 4 may not.  but after that doing number 2 is 10x more lucrative.

i leverage lots of things and run lots of schemes to make a dollar.  this one has other better options.

i leverage my taxes and insurance on my house by not escrowing and paying them lump sum at the end of the year.  allows me to keep 7k invested like you're doing. 

[Car Jack]

I'm with boarder42.  But it's because of risk and my view on debt.  I absolutely hate debt and when faced with either 1.25% to buy my Jeep a few years ago or paying out of savings, I paid it in cash.

So from a risk perspective.  If you borrow and use for investment, your risk is 2 fold.  Investments can go down and you may lose whatever you put up as security on the loan.  Or risk big interest if you can't pay the credit card you transferred.  So in short, your risk is that you might have to pay a lot of money if things go south.

Tradelines:  You use ONLY cards that you can accept will be shut down.  Upside:  few hundred dollars a card every month.  Downside: That card gets shut down and you move to the next.  There's zero ($0) nada actual money at risk.

And yes, I paid off my mortgage 15 years ago and have no plans to take out another mortgage ever.

[boarder42]

I'm with boarder42.  But it's because of risk and my view on debt.  I absolutely hate debt and when faced with either 1.25% to buy my Jeep a few years ago or paying out of savings, I paid it in cash.

So from a risk perspective.  If you borrow and use for investment, your risk is 2 fold.  Investments can go down and you may lose whatever you put up as security on the loan.  Or risk big interest if you can't pay the credit card you transferred.  So in short, your risk is that you might have to pay a lot of money if things go south.

Tradelines:  You use ONLY cards that you can accept will be shut down.  Upside:  few hundred dollars a card every month.  Downside: That card gets shut down and you move to the next.  There's zero ($0) nada actual money at risk.

And yes, I paid off my mortgage 15 years ago and have no plans to take out another mortgage ever.

and just to point out i'm all for any risk or leverage to make money.  in this case this doesnt have value for me.

[bb11]

I'm with boarder42.  But it's because of risk and my view on debt.  I absolutely hate debt and when faced with either 1.25% to buy my Jeep a few years ago or paying out of savings, I paid it in cash.

So from a risk perspective.  If you borrow and use for investment, your risk is 2 fold.  Investments can go down and you may lose whatever you put up as security on the loan.  Or risk big interest if you can't pay the credit card you transferred.  So in short, your risk is that you might have to pay a lot of money if things go south.

Tradelines:  You use ONLY cards that you can accept will be shut down.  Upside:  few hundred dollars a card every month.  Downside: That card gets shut down and you move to the next.  There's zero ($0) nada actual money at risk.

And yes, I paid off my mortgage 15 years ago and have no plans to take out another mortgage ever.

and just to point out i'm all for any risk or leverage to make money.  in this case this doesnt have value for me.

Okay, and I have no problem with that. However, as we just discussed in our PM convo your method doesn't work for everybody either. The numbers you were quoting relied upon having cards over 5 years old with credit lines over $15k. So I'd like to keep the discussion open as a possible money-making solution on its own merits. As a reminder, this discussion is for any form of cheap credit not just credit cards. They are just the method I've used so far (in addition to not paying down some student loans right away after undergrad).

[talltexan]

One big mistake I made when working a strategy like this was to have smaller amounts on too many cards. It's wayyyy more anxiety to have three cards with $3K than to have one card with $13K.

[MasterStache]

I can see the benefits to these various strategies. I don't think I would take on the risk of balance transfers though. I sell tradelines as well, although I don't make much doing it because of my lack of viable cards. I churn CCs and started churning bank accounts as well. I see very little to no risk with these methods so I am much more comfortable with them.

[bb11]

I can see the benefits to these various strategies. I don't think I would take on the risk of balance transfers though. I sell tradelines as well, although I don't make much doing it because of my lack of viable cards. I churn CCs and started churning bank accounts as well. I see very little to no risk with these methods so I am much more comfortable with them.

What risk do you see with the balance transfer? I'll grant you that churning is definitely lower risk overall, but I think this would be low risk as long as it's managed thoughtfully.

[secondcor521]

Just saw this thread today.

I don't have a problem with the idea expressed in the OP, and did it myself in various forms.  Personally I usually prefer to arbitrage across two fixed spreads (borrow at 0% on CC's and invest at 5% in savings accounts); the OP's investments are a variable that have downside risk that I'm not comfortable with, as small as OP might consider it to be.  I don't do it now myself for a few reasons:  (1) My expenses annually that I could pay via CC aren't that big, so the arbitrage opportunity is small, (2) regardless of how little work it is, I'm retired and this particular idea sounds too much like work to me, (3) being retired I don't have the cash flow needed to use to pay off a large CC bill if the 0% transfer game ended unexpectedly, and (4) there are other things that pay better with less risk.

As far as the last item goes, the two that I do now are MS'ing for CC bonuses, and trade line piggybacking.  Much better on the $$$/time/risk scale IMHO.  For whatever reason these two ideas feel like fun and the OPs's idea seems like work.  To each his own, JMHO, YMMV, etc.

[boarder42]

Just saw this thread today.

I don't have a problem with the idea expressed in the OP, and did it myself in various forms.  Personally I usually prefer to arbitrage across two fixed spreads (borrow at 0% on CC's and invest at 5% in savings accounts); the OP's investments are a variable that have downside risk that I'm not comfortable with, as small as OP might consider it to be.  I don't do it now myself for a few reasons:  (1) My expenses annually that I could pay via CC aren't that big, so the arbitrage opportunity is small, (2) regardless of how little work it is, I'm retired and this particular idea sounds too much like work to me, (3) being retired I don't have the cash flow needed to use to pay off a large CC bill if the 0% transfer game ended unexpectedly, and (4) there are other things that pay better with less risk.

As far as the last item goes, the two that I do now are MS'ing for CC bonuses, and trade line piggybacking.  Much better on the $$$/time/risk scale IMHO.  For whatever reason these two ideas feel like fun and the OPs's idea seems like work.  To each his own, JMHO, YMMV, etc.

You've basically reiterated everything is been saying. And I share the same sentiments

[MasterStache]

I can see the benefits to these various strategies. I don't think I would take on the risk of balance transfers though. I sell tradelines as well, although I don't make much doing it because of my lack of viable cards. I churn CCs and started churning bank accounts as well. I see very little to no risk with these methods so I am much more comfortable with them.

What risk do you see with the balance transfer? I'll grant you that churning is definitely lower risk overall, but I think this would be low risk as long as it's managed thoughtfully.

Because you are invested in the market. The other avenues of income generation are pretty much guaranteed with no monetary risk. (besides getting CC shut down)

[boarder42]

over 4 years i'd say the risk of losing money in the market is on the smaller side.  here's a graph of rolling 5 year returns for the dow

http://1.bp.blogspot.com/_i47TEqZoAbw/SfYbg2rlNSI/AAAAAAAAAGQ/C3iggPkQORQ/s1600-h/5-Yr+Fwd+Returns+Graph.jpg

just a lot of work for not a lotta gain. compared to much better things that can be done with one's time and credit.

[bb11]

I can see the benefits to these various strategies. I don't think I would take on the risk of balance transfers though. I sell tradelines as well, although I don't make much doing it because of my lack of viable cards. I churn CCs and started churning bank accounts as well. I see very little to no risk with these methods so I am much more comfortable with them.

What risk do you see with the balance transfer? I'll grant you that churning is definitely lower risk overall, but I think this would be low risk as long as it's managed thoughtfully.

Because you are invested in the market. The other avenues of income generation are pretty much guaranteed with no monetary risk. (besides getting CC shut down)

Sure. But that's the risk of all investing. I'm saying that you have $28,000; you can invest it slowly over the next 4 years, or all at once at the end of the 4 years.  You're saying you'd rather wait because the market may drop? It's all about time value of money. I'm putting the money to work earlier.

over 4 years i'd say the risk of losing money in the market is on the smaller side.  here's a graph of rolling 5 year returns for the dow

http://1.bp.blogspot.com/_i47TEqZoAbw/SfYbg2rlNSI/AAAAAAAAAGQ/C3iggPkQORQ/s1600-h/5-Yr+Fwd+Returns+Graph.jpg

just a lot of work for not a lotta gain. compared to much better things that can be done with one's time and credit.

Again, the comparisons you're making are a bit incorrect and unfair. In most instances selling tradelines can be done alongside this, they are not mutually exclusive. Also, the gains you've shown are on the high end. Many people do not have the credit history and limits you do.

You also keep saying it's "a lot of work". Manufactured spending sounds like considerably more work to me. This is maybe an hour per year for $1,500. When the average wage is $25 per hour in the US, saying this is "a lot of work for not a lot of gain" just doesn't make sense.  You can also manufactured spend on 0% APR cards (most new cards) and then when the promo period is up transfer the payment to a new card for no fee, using the exact same method I've detailed. So as it stands I reject the notion that the opportunity cost is much too high or that this is too much work/risk for the reward.

[boarder42]

Ms and tradelines are guaranteed returns for the time I put in. You're leveraging a tiny amount of debt with the hope of standard market returns.

If you want to do it go for it but even most of us who live on the more extreme side of things like this are saying it's not worth the effort or risk.

And no this can't be done along side the things I do. I get turned down for credit cards frequently bc of how many inquiries I have so I would have to pause my other endeavors to hope to get the balance transfer card you get.

Imo if you aren't willing to do this on the level secondcor did then you are wasting your time chasing pennies.  And the reason you wouldn't do it on that level is the risk. So thru the transitive property you're taking on risk that you see as easy to mitigate at a small level but it's the same risk as would be at the higher level.

[bb11]

Ms and tradelines are guaranteed returns for the time I put in. You're leveraging a tiny amount of debt with the hope of standard market returns.

If you want to do it go for it but even most of us who live on the more extreme side of things like this are saying it's not worth the effort or risk.

And no this can't be done along side the things I do. I get turned down for credit cards frequently bc of how many inquiries I have so I would have to pause my other endeavors to hope to get the balance transfer card you get.

Imo if you aren't willing to do this on the level secondcor did then you are wasting your time chasing pennies.  And the reason you wouldn't do it on that level is the risk. So thru the transitive property you're taking on risk that you see as easy to mitigate at a small level but it's the same risk as would be at the higher level.

Yes I understand your view. I'm curious if anyone else has any thoughts, because in my mind I've responded to your points and there's not much further to discuss unless you have something else to say. I disagree with you, and your situation is far from representative.

[boarder42]

Yeah we dropped it and you brought it back up. Obviously most others aren't interested in this or it would be 25 pages like selling tradelines.

[bb11]

Yep, I started the thread because I am interested in discussing it. I just would like to get other's opinions on leveraging cheap debt to invest, but I understand your point of view.

[Lmoot]

I have always done this. I have two USAA credit card's who offer $0 fee and zero APR every now and then. I have transferred over $15,000 just this year from promo cards that were going to expire, onto my two USAA cards. And it cost me zero dollars. I am currently turning about 35K, all at 0% interest.

 Luckily most of my credit cards will periodically offer 0% APR, so I don't even need to open new cards unless I want to.  I don't do it so that I could use the cash to invest in the stock market, rather I use credit cards as a cheap loan source. I needed it when I fixed up my house after I first bought it, and then I needed it again to fix it up in order to rent it out and get my insurance lowered.

[talltexan]

I have always done this. I have two USAA credit card's who offer $0 fee and zero APR every now and then. I have transferred over $15,000 just this year from promo cards that were going to expire, onto my two USAA cards. And it cost me zero dollars. I am currently turning about 35K, all at 0% interest.

 Luckily most of my credit cards will periodically offer 0% APR, so I don't even need to open new cards unless I want to.  I don't do it so that I could use the cash to invest in the stock market, rather I use credit cards as a cheap loan source. I needed it when I fixed up my house after I first bought it, and then I needed it again to fix it up in order to rent it out and get my insurance lowered.

LMoot-
Part of the mustachian lifestyle is maintaining a slug of investments, so if you have them, this source of credit allows you to keep from selling some of them for the real estate investment you're describing. The $35K you describe sounds small relative to a potential mortgage, but without knowing your annual expenses, I have no way to put it in context (it would probably be 3-4 months of expenses for the talltexan household).

[daverobev]

Suggestions for good long term cards that periodically offer 0%? This is 0% deposit to checking, yes, not just BTs?

I'm limited in which providers I can go with, unfortunately (ITIN, no SSN).

[Lmoot]

I have always done this. I have two USAA credit card's who offer $0 fee and zero APR every now and then. I have transferred over $15,000 just this year from promo cards that were going to expire, onto my two USAA cards. And it cost me zero dollars. I am currently turning about 35K, all at 0% interest.

 Luckily most of my credit cards will periodically offer 0% APR, so I don't even need to open new cards unless I want to.  I don't do it so that I could use the cash to invest in the stock market, rather I use credit cards as a cheap loan source. I needed it when I fixed up my house after I first bought it, and then I needed it again to fix it up in order to rent it out and get my insurance lowered.

LMoot-
Part of the mustachian lifestyle is maintaining a slug of investments, so if you have them, this source of credit allows you to keep from selling some of them for the real estate investment you're describing. The $35K you describe sounds small relative to a potential mortgage, but without knowing your annual expenses, I have no way to put it in context (it would probably be 3-4 months of expenses for the talltexan household).

I'm currently focusing on investing in rental property, so other than investing up to my employer match in my 401k, all available cash is going into CD's/high yields savings to be used w/in a year for a DP on another rental. I make less than $60k so I can only focus on one or the other to make any real headway. Once I get a good portfolio of rental properties, I'll feel better about investing more in stocks.

[talltexan]

Can I just confirm that you are doing two things:

1. building up a slug of cash for a down-payment on a rental property (in a low-yield savings account, I imagine that you are earning 1% or less here), and
2. Maintaining a balance of $35,000 on credit cards, currently at zero percent interest

It sounds like you are very leveraged. Are you sure the numbers will break in your favor? Will you be able to finance that $35K interest-free indefinitely?

[Lmoot]

1) Yes, at a little over 1%
2) Not maintaining; my minimum payments are around $500/month (which are being applied to the principle since it's at 0%) and I'm not currently adding to the balance. Some of the debt is at 0%, into 2019.

You are right that I'm leveraged for my income, and this is the most consumer debt I've carried. I only have a $40k mortgage as my other debt...no student loan, no vehicle loan, or personal loans, etc. And very low expenses which is why I'm able to save roughly 60% of my net income.

At least $5-7k of the debt will be paid off before I purchase another property in Dec/Jan, + any minimums paid, so it will go down quite quickly (I hope), and make room for up to a $75k mortgage (I live in a LCOL area). I wish I had the ability to leverage even more (a must in property investing).

Can you explain the "break even" bit? Even if I saved the cash to do the fixes to the rental property (which brought in a $1500 insurance savings, and additional $250/month in rent), I'd still have to save it in accounts earning the same, right? My rationale for putting off payment of the repairs for another year or 2 (or longer if more 0% 0 fee BT deals come up), is that property in the area I want to invest in is going up by the thousands nearly every month I wait. I'd rather frontload the goal of buying ASAP, and worry about paying off debt later....especially since the debt is "free". Not to mention the sooner I buy another property, the sooner I'll earn more rental income. I am new to the game, but am finding out that time = money when it comes to real estate. So I am experimenting (admittedly it's an experiment), with pushing as many of my expenses to the other side of the purchase of a property so I can get into the market sooner rather than later.

[talltexan]

Let's suppose you have $1,000 next month that you can divide between debt service and savings for down payment (with a 20% down payment expected).

You pay $500 toward your credit card debt, and put the remaining $500 into your savings account, increasing by $2,500 the house you'll be able to (eventually) finance. Every month you wait allows you to afford more house, but--unfortunately--every month you wait also allows the houses in your area to appreciate. If the average house is $120,000, and it appreciates 5%/year, than you gain $10,000/year. Minus your margin on interest rates. Am I thinking about this correctly?

[Lmoot]

Let's suppose you have $1,000 next month that you can divide between debt service and savings for down payment (with a 20% down payment expected).

You pay $500 toward your credit card debt, and put the remaining $500 into your savings account, increasing by $2,500 the house you'll be able to (eventually) finance. Every month you wait allows you to afford more house, but--unfortunately--every month you wait also allows the houses in your area to appreciate. If the average house is $120,000, and it appreciates 5%/year, than you gain $10,000/year. Minus your margin on interest rates. Am I thinking about this correctly?

I think I see what you're saying. I'm not worried about affording more house....I'd rather buy more houses, cheaper and smaller for maintenance and fix up cost.  The less I spend on this house, the more headway I can get on saving for the next one. Appreciation isn't anything I'm concerned about as I will be holding them long term. Also I want to buy in a specific neighborhood which doesn't have regular inventory so I want to be ready to go when something becomes available.

Wouldn't you also minus lost rent opportunity from the appreciation? I have quite a few interested potential renters, including a previous tenant, all I'm missing are the properties.  What would be the purpose of paying down 0% loan? I do have an emergency fund separate from the house fund another means of getting cash if I need to. If anything I am hoping for another promotional 0% 0 fee on one of my existing cards, so I can push the date back even further.

[talltexan]

I think we agree: real estate investors CLAIM they can achieve 20% return, cash-on-cash. With that average (I imagine it depends upon your skill as a landlord), allowing your credit balance to stay high makes sense, even if the 0% rate really turns into a 3% effective rate after fees/rising interest rates/goof-ups. Putting money into investment real estate is the clear, mathematical (note my choice of adjective) winner, before adjusting for risk.

Of course, another advantage of real estate is that it gives you access to low-price debt, assuming lenders don't have an issue with five-figure credit card balances. Some people have told me the lenders even like those balances.

[talltexan]

of course, if that 20% figure really holds up, then you should be able to retire--into an opulent lifestyle--with a net work below $500,000.

[Lmoot]

of course, if that 20% figure really holds up, then you should be able to retire--into an opulent lifestyle--with a net work below $500,000.

 I don't know yet how I am as a property investor/landlord. I kind of cheated my way into it. I moved back home with family when an opportunity to rent my house out to a coworker came up. And from there I've just been renting to friends and coworkers at a below market value, but it ensures that I am renting it to responsible people who respect me and respect my property which is important to me since I have plans To one day retire, at least part of the year in this house.  I have been very lucky tenant wise. Part of the reason I want to buy in the same neighborhood where my current primary property is, is that it is close to where I work and I have a a reliable tenant pool to choose from. I could easily exclusively rent to employees (5 min walk to work is a big sell)....without breaking any housing laws of course. I am on my 4th set of tenants, previous tenants stayed 2.5 years and would have stayed longer but I had to do major repairs and was contemplating moving back in. Tenant bf that stayed 3 years. The current set of tenants have only been there since February, and they have already painted the interior, put nice shelving up, and installed a sand foundation patio, as well as do basic maintenance and generally act as my property managers, meeting with service people etc.  have a good relationship with them, and even went to their house warming party… Kind of surreal in your own house LOL.

 Anyway, all that to say, I obviously do want to make a profit, but my lifestyle as a landlord is just as important to me. I'm willing to charge lower than market rent to attract good renters, and I hope to never have to advertise. My tenants have all been word of mouth and month to month, with the agreement that it would be available to them for a min of one year.  I don't want anyone there who doesn't want to be there, or can't afford to be there. I'm confident enough in my ability to find tenants quickly, so vacancy and turnover is not really a concern for me. However, like I said I only have the one property who knows what the future holds. Perhaps bad experiences will harden me. So I don't really follow any of the landlord margin rules, or plan on it going forward. I can see myself being a very laid-back landlord, and tailoring the property, price, to my tenants and my needs.  In fact I'm currently on the lookout for properties in the area for a specific prospective tenant, who has been wanting to rent my house for several years. I have known this tenant for just as long, and his fiancée and they would be amazing. So I am hoping to have the house purchased and ready by the time their lease ends in June of next year.  I may not make the most, but I will focus more on reducing the risk, and it is more important to me to not be stressed.

 ETA I will make more prudent financial decisions on the next rental I purchase. Including charging closer to the market rent, but still under. I charge less for my house because my family and I still use part of the property (separate workshop and yard space). But I won't have any practical or emotional ties to future properties.

[bb11]

of course, if that 20% figure really holds up, then you should be able to retire--into an opulent lifestyle--with a net work below $500,000.

 I don't know yet how I am as a property investor/landlord. I kind of cheated my way into it. I moved back home with family when an opportunity to rent my house out to a coworker came up. And from there I've just been renting to friends and coworkers at a below market value, but it ensures that I am renting it to responsible people who respect me and respect my property which is important to me since I have plans To one day retire, at least part of the year in this house.  I have been very lucky tenant wise. Part of the reason I want to buy in the same neighborhood where my current primary property is, is that it is close to where I work and I have a a reliable tenant pool to choose from. I could easily exclusively rent to employees (5 min walk to work is a big sell)....without breaking any housing laws of course. I am on my 4th set of tenants, previous tenants stayed 2.5 years and would have stayed longer but I had to do major repairs and was contemplating moving back in. Tenant bf that stayed 3 years. The current set of tenants have only been there since February, and they have already painted the interior, put nice shelving up, and installed a sand foundation patio, as well as do basic maintenance and generally act as my property managers, meeting with service people etc.  have a good relationship with them, and even went to their house warming party… Kind of surreal in your own house LOL.

 Anyway, all that to say, I obviously do want to make a profit, but my lifestyle as a landlord is just as important to me. I'm willing to charge lower than market rent to attract good renters, and I hope to never have to advertise. My tenants have all been word of mouth and month to month, with the agreement that it would be available to them for a min of one year.  I don't want anyone there who doesn't want to be there, or can't afford to be there. I'm confident enough in my ability to find tenants quickly, so vacancy and turnover is not really a concern for me. However, like I said I only have the one property who knows what the future holds. Perhaps bad experiences will harden me. So I don't really follow any of the landlord margin rules, or plan on it going forward. I can see myself being a very laid-back landlord, and tailoring the property, price, to my tenants and my needs.  In fact I'm currently on the lookout for properties in the area for a specific prospective tenant, who has been wanting to rent my house for several years. I have known this tenant for just as long, and his fiancée and they would be amazing. So I am hoping to have the house purchased and ready by the time their lease ends in June of next year.  I may not make the most, but I will focus more on reducing the risk, and it is more important to me to not be stressed.

 ETA I will make more prudent financial decisions on the next rental I purchase. Including charging closer to the market rent, but still under. I charge less for my house because my family and I still use part of the property (separate workshop and yard space). But I won't have any practical or emotional ties to future properties.

And I'll tell you what. The more roommates I live with the more I realize how absolutely critical getting the right roommate/tenant is. That's a quality of life measure I would pay a premium for, on either side of the renter/owner equation. The wrong people make your life hell.

[SubL stache]

I need to learn this tradeline game, I'm running out of bank bonus sign ups. 

[boarder42]

I need to learn this tradeline game, I'm running out of bank bonus sign ups.

this isnt the tradelines thread but there is one here you can go learn and join