Credit Card Cash Advance ?

Question

Has anyone got experience in using the cash advance as a downpayment, and repaying the loan from the cash flow? Has this been effective? What are some risks (aside from the high interest rate on repayment)?

thanks !

Michael Evans · Answer

Wells Fargo has an investment loan program where you can do a cash out refinance the next day after you close. 70%-80% LTV of the "appraised" value.  Closes in 45 days.

Mark Douglas · Answer

@Moshe H.  Seasoning refers to the length of time the building has been occupied with renters.  Lenders usually want at least 1 year of "occupancy" to validate that the business can generate consistent income, and support the loan.

I'd ask from the refinancing lender what their particular requirements are before closing on the hard money loan.  If your hard money lender will go to at least 13 months, and XYZ bank only needs 12 months of seasoning, this should give you enough time to stabilize the building, and confirm to the new lender that the project can generate income.

Roger Poulin · Answer

It is a commercial mortgage, not a retail consumer mortgage @Josh Braun. It is a regional bank and they did waive the seasoning. I still got to hold the mortgage in my company name, no points, and a sub 5% APR. Not as good as a consumer mortgage, but I am not complaining.

Christina R. · Answer

@John Casmon is on point.

I bought a property is Baltimore that was cheap enough to do the entire closing with a cash advance, which in my situation was waaay cheaper than an HML loan.  Actually, it wasn't a cash advance (or maybe it was and I'm splitting hairs on terms?) - it was one of the promotional offers where you pay a minimum/possibly a small % a "points" - and then minimum monthly payment but the APR was 0% for over a year.

I then had a private lender provide the rehab funds.  I had to wait 6 months to do a refinance into a conventional mortgage.  and was able to refinance almost all of the money out... the rehab went over due to some unforeseen issues (beware, this almost always happens, I have now found out). Obviously my private lender was repaid in full and I had to eat the overage out of my funds.

So to get back to the OP - I would say  using credit cards is a strategy that can be very productive and useful but you MUST BE DISCIPLINED with them (those pesky interest hikes and penalties can kill go), you must have a plan B for if your real estate flip or rental rehab spirals out of control and you can't get it (a) done in time before those credit card fees kick in and/or (b) you don't appraise for what you thought you would when you want to refi (and then pay off the credit card).  Be very careful, also, of then using one credit card offer to pay off another credit card offer.  Pretty soon you think you're flush with cash when you're really flush with debt.  We all know the real estate market can turn very quickly

Summation - use them wisely, use them intentionally (meaning your number 1 goal is to pay them off in full ASAP).

Roger Poulin · Answer

I have used a cash advance on a card to buy a property. I did it so I could close quickly, but I applied for a traditional loan as soon as I had it under contract.  This allowed me to "refi" and pay back the card about a week later. Side benefit, I was able to get 80% LTV, without considering the purchase price. It actually covered the entire purchase and another small house I was buying the same week. The cost of my advance was less than a hard money loan.

John Casmon · Answer

@Moshe H. There are two types of seasoning and while @Mark Douglas answer is correct, the proper context for what Roger referenced is about personal asset seasoning, not property seasoning (which is more about refinancing). Basically, the banks want to see that the money is yours and in your account for a certain period of time before they give you credit for it. This time varies based on the bank. They do this to make sure you have the money and essentially aren't borrowing from some other asset or person just to show you have the money when you really don't.When I was still in college, I had good credit and no money while my step-mother had money and terrible credit, so we agreed that I would apply for a mortgage and she would put money in my account to show the bank I had enough for the downpayment and took it right back out the next day. That's exactly the kind of behavior the seasoning period is trying to discourage.

Mark Douglas · Answer

@Moshe H.  From my experience, the length of tenancy usually doesn't "roll over" to the new owner.  The duplex I got had a tenant already in it when I purchased it.  She's been here for 6 years, but the lender didn't count her income as rental income, because it hadn't been under my ownership at all.

Having said that, I came across a lender last week that is able to count up to 75% of the rental income from day 1, without me having to wait 7 more months till I reach the 1 year mark.

Just depends on the lender, I suppose.  That lender that can do the 75%, is a smaller, regional bank.  It seems that they tend to have a little more flexibility with their regs.

Ricardo Meza · Answer

Hi Mark,

I don't have any experience with this, but I understand the logic, so long as you have the cash flow you need.  However, if you're in an area that's hard to find tenants, or if you have a lot of turn-over, you need a plan B.

Good luck!

Jeff Filali · Answer

I haven't used CC cash advance, but have used 0% intro CC's to leverage to have more funds for rehab work, and other expenses like advertising.  I had a little over $30,000 credit line spread over a few cards at 0% intro for the first 18 months, this helped me ramp up faster, and I could pay it off as I flipped properties.

Michael Evans · Answer

It may be. Contact a Wells Fargo loan officer for details

Credit Card Cash Advance ?

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