Credit Card How-To
The following are just a few real life examples of ways to utilize the Profiting From Credit Cards strategy as a real estate investor. There’s a dozen more creative ways to profit than we list here, so use your imagination to figure out how to use the PFCC strategy in your real estate investing business.
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Buy, Fix and Flip.
1) Balance transfer enough money into your account to buy a house at a steep discount with all cash. Cash is king, and you should be able to get much better prices being able to close quickly as a cash buyer. Just make sure you transfer enough from your credit cards to cover; purchase price, rehab costs, closing costs(both buying and selling), taxes, insurance, overages, and the monthly credit card payments.
2) Rehab the property to the level of quality that best suit’s the market. Don’t over-rehab by adding granite counter-tops to a low income area house, and don’t try to cut corners and not update the kitchen and bathrooms in a outdated middle class suburban property.
3) Make sure you are getting the work done as fast as possible without sacrificing quality. Time is money, and with the current down market, you need to have properties ready to sell faster than in an up market.
4) Sell the property as quickly as you can while still making a reasonable profit. If you have a marketing system in place that works, use it. If not, don’t hesitate to use a good realtor to help you sell your house faster.
5) Depending on how long it takes you from start to finish, you may have profited quickly enough to buy, fix and flip another couple of properties before the credit cards start charging you interest on the balance transfers. If you are able to complete a few deals in the promotional period of 0% interest on the balance transfers, you will most likely be able to pay back all you borrowed, pay the taxes on your profits, and still have plenty of cash left to buy more properties to fix and flip.
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Buy and Hold - with a partner that has good credit.
1) Balance transfer enough money into you and your business partner’s joint account to buy a house at a steep discount with all cash. Once again, as a cash buyer you should be able to get much better deals by being able to close quickly, and wholesalers prefer working with cash buyers. Make sure you transfer enough to cover the purchase price, closing costs(both buying and re-financing), taxes, and insurance. Make sure that the property has positive income with a mortgage at the terms you will be able to re-finance the property at. To determine if the property will have positive income, subtract from the rent amount; the mortgage payment, taxes, insurance, management fee, 5-10% for repair reserves, and 5-10% for vacancy. If after subtracting all of the estimated expenses you still have a positive number, your property will most likely have positive income.
2) Get the property rented. Either find a good tenant for the property yourself, or have your property manager find a good tenant. The key word in the last sentence is “good”. A bad tenant is one of the worst things you will ever have to deal with as a buy and hold investor. Proper screening techniques will help save dozens of headaches and thousands of dollars by keeping you from renting to a bad tenant. We at RealEstateInvestor.com recommend hiring a professional property manager.
3) Once the property is rented out for positive income, have the good credit partner re-finance the property. Since the FHA dropped the 90 day requirement, you may now re-finance a property shortly after purchasing it. Most lenders will still only let you re-finance your original purchase price within the first 6 months even if you have an appraisal at a much higher price than you paid. Local banks are your best bet for higher than you paid re-financing amounts. This will get you your money back quickly, and get you on your way to doing another discounted cash deal. You could also hold off re-financing the property for 6-12 months to collect rents without a mortgage payment and build up your cash reserve. It is a lower profit strategy since you won’t be able to complete as many deals before having to pay back the credit cards before the promotional 0% interest rate expires, but it is also a lower risk strategy.
4) Depending on how quickly you are able to re-finance and how much more you are able to cash out, you may be able to complete a handful of deals before paying back the credit cards in full, still have cash left over for yourself and own multiple rental properties with your partner. Not a bad twist on the traditional get rich slow method of real estate investing.
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Buy and Hold - on your own with good credit.
Follow the same steps as in “Buy and Hold - with a partner that has good credit” with the following exceptions.
1) Limit the number of cards you apply for in your PFCC to as few as you will need. The fewer the cards you apply for, the less likely it is your credit will drop from multiple inquiries over multiple days.
2) Balance transfer no more than 30% of the total credit limit on any one card. As long as you maintain balances under 30% of each card’s maximum, you will not lower your score more than a few points.
3) Use a credit monitoring agency subscription to keep track of your credit so that there are no surprises when it comes time for you to re-finance the property.
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Wholesaling - experienced wholesalers only.
1) Balance transfer enough money into your account to purchase a property or multiple properties with all cash. You should already have a source for great bulk deals or have distressed sellers contacting you to buy their properties fast, as well as a pool of buyers to offer your deal(s) to. Make sure you transfer enough to cover all your holding expenses for the property in case it doesn’t sell as quickly as it should.
2) Market the property to your prospective buyers. Since you actually had to purchase the property to get the bulk discount or due to time restraints, make sure you add the closing costs as well as holding costs to your normal wholesaling mark-up.
3) Sell it and go on to the next deal. As an experienced wholesaler, you’ve “been there, done that, and got the t-shirt”. The PFCC strategy is just another tool in your wholesaling arsenal. Just don’t forget to pay back the credit cards in full before the promotional 0% balance transfer rate expires.
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Pre-Foreclosure - experienced pre-foreclosure investors only.
1) Balance transfer enough money into your account to purchase a property from a distressed seller with all cash. Make sure you transfer enough to cover all the costs associated with your plans for that property.
2) As an experienced pre-foreclosure investor, you already have a strategy for the property. Depending on the area and how low of a price you were able to get the bank to accept for the short sale, you can choose to; re-sell the property at market price with a realtor, wholesale it to another investor, re-finance it and keep it as a rental property, or fix and flip it.
3) Being able to come up with cash quickly can help you get the deal of the decade. Just make sure you pay back the credit cards that helped you make a big profit.
