Buying a House With a Credit Card and No Money Down

[Ross Yeager]

DISCLAIMER: I would never recommend anyone else doing this. I did this as a financial hack to see if it could be done knowing that I could cover the deal in cash should anything have gone sideways.

Yes, you read it right: for one of my properties back in early 2019, I purchased a property using only credit cards!

Here are the details...

The Property

On my third property, I found a rather inexpensive buy and hold rental from a wholesaler in the Philadelphia area. It was going for an all in cost of about $63k and was pretty much turn key. Nothing fancy, but definitely an as-is rental for the area. The area had a target rental of $1100/month and would therefore cash flow well.

The Financial Mechanics

Here was my strategy going into this "experiment".

1. Use a business account to purchase the property and establish the credit. This gives you the protection of an LLC for your rental while also establishing business credit history, which can be very useful down the line as your revenue increases.
2. Get approved for enough business credit cards with 0% intro rates to cover the cost of the purchase. Sometimes this might not be possible. In my personal situation, I was able to do this. Make sure you don't sign up for any cards with annual fees and that the introductory period is a reasonable amount of time (typically 1 year or longer is desired).
3. Use a credit card liquidation company to liquidate your credit cards (reach out to me for more info). I was able to do this for a 5% fee, so my effective interest rate was 5% which is better than most commercial loan rates (at the time) and would cover 100% of the loan to cost (LTC).
4. Use the liquidated cash to purchase the property
5. Get it rented out and cash flowing
6. Use a cash out refinance to transition into long term debt and pay down the credit cards, with down payment being paid down by the extra cash flow until the cards were paid off. **
7. Have a property "for free"

** Once I had it rented out, I ended up choosing to not refinance in order to maximize cash flow and to improve my DTSR for future purchases

The End Result

This property has turned out to be pretty good! It's appreciated substantially and brings in about $490/mo in cash flow and at this point all of the credit cards have been paid off. We've had no issues in rent collection through Covid and have had a generally low maintenance tenant. It also did allow me to scale up a little faster as I was able to start two more projects during this time due to my leveraged positioning.
Here are the stats as of today from my Stessa portfolio tracker:

My original goal was to refinance out of this property, but given how well it cash flowed and how long I had to pay back the credit cards, I ended up just keeping it free and clear in order to maintain a solid cash flow stream (it's currently the only property I own that is free and clear).

In the next few years as the area continues to gentrify and appreciate, I may do a "BRRRR" on my own property (minus the B for Buy) using a renovation loan in order to raise the rental income to the next tier where it could support a refinance while producing similar (or better!) cash flows.