Using Credit Cards for Finance BRRRR

[Adah N.]

Hi Everyone, I am new to BRRRR and have yet to make my first purchase. I have a couple questions...

Question 1 - who here uses credit cards to finance renovations on their properties?

Why on earth would you want to use credit cards? I am thinking I could make purchases and pay contractors and then balance transfer to another credit card with a 3% to 4% fee for an entire year. 

How about the possibility you will not be able to renovate and refinance within a year and pay back the card? This leads me to the next question.

Question 2 - for seasoned BRRRR investors, how much time on average does it take from closing to rent? How about rent to refinance?

Question 3- for people who only have money for down payment but not to renovate, how did you finance your BRRRR? Is HML a better way?

Thanks,

Ahdah

[Kristin Feerst]

A hard money loan is better than using a credit card. Carrying large balances on a credit card will hurt your credit score and could affect your ability to refinance. So even with 0% APR if your utilization rate is high your credit score will take a beating.

Time from closing to rent depends on extent of renovations, how quickly your GC can start and how many jobs they have going on (i.e. is there stoppage of work at your job due to other jobs they are doing), and timing for permits and inspections.  For a major project easily 3-4 months.  Minor jobs maybe 6 weeks. 

Even with a HML you do need to have savings for a down payment, closing costs, insurance and some of estimated rehab cost, at least enough to get to first draw, plus contingency.

Probably best to save more prior to starting something.  I would not use credit cards unless I knew I had the funds to pay them off right away.