Using a credit card for investing

[Crystal Sherman]

Has anyone used a cash advance on a credit card to finance a property? We have some high limits on a couple of credit cards with the interest rate being either 0% or 4%. My husband is military and the rates won’t change unless he gets out. We will have $10k in cash and I’m looking at financing $20-40k on the cards. It seems our rates are lower this way than any other financing options and we would have more access to cash only deals. Thoughts?

[Bob Daniels]

0 and 4% rates are only valid on pre-existing debt that occurred prior to joining the military unless I'm missing something massive.  I would be super cautious as new debt will likely incur the full interest rates unless you can explain what kind of system he is on.

[Matt Hurley]

I've used credit cards for both real estate and other businesses. I personally recommend trying to use the card for actual credit purchases: contractor payments, materials, holding costs (utilities) etc., not for cash advances. In my experience a cash advance has significantly higher interest, and even if you have no interest (or special rates) the cash advance is usually much lower than your total approved credit. For example I have 5 business credit cards that I use right now, one of the cards was approved for $20k in credit, I only get $4k in cash advance. 

Long story long, use cash for your down payment, use the credit for as much of the other stuff as you can. 

[Matt K.]

One big downside to this is it'll tank your credit till you pay down the balances. It'll also likely negatively impact your DTI so if you wanted to get a loan in future it could be harder....

So assuming you're not planning on taking out loans for these properties and can manage the temp hit to your score it'd be a ok plan.

I would be more worried about the performance of a sub 50k property...generally that's a unique asset that needs hands on management from experienced operator. Also going to need a lot of them to spread the costs/risks...and a team in place to do the work.

[Mark Durham]

This is one of my favorite strategies for Creative Financing using OPM. I've bought many, many deals with CC's.

If you know yourself & can be very disciplined to pay the cards off before the low rate changes to a high rate it's a great way to use OPM & Creative Financing.