Buy houses with credit cards? You can get hurt - Posted by Millie I.


#1

Posted by Millie I. on December 27, 1998 at 02:20:33:

Answers for the eight investors that email me asking me about credit cards loans at 3.9%:

Q1: How do I get the low rates and high credit line?
Answer : Sorry, there is no special program out there that investors can sign up to get a cheap loan. I have to earn my credit line through the years the same way everybody else does. I have been in business for a long time, and I always pay my bills on time, that is the magic to getting a higher credit line.

Q2: How do I find companies that offer these programs?
Answer : I do not look for them, they find me. Actually, many credit card companies offer low introductory rates to people with good credit everyday. But the line of credit will differ for each applicant.

Q3 : How can you get the same deal?
Answer : Credit card companies are advertising on TV, in newspaper, using mail solicitations, and offering 5.9%, 4.9%, 3.9%, for 6 months, 12 months, etc. You can always apply, but whether they give you a card, or what credit line they offer you depends on your own credit ratings and income levels.

Q4 : Do I buy houses using credit cards?
Answer : Yes I do, sometimes using credit card loans only, other times using some of my own cash. It is way cheaper than paying $3000 loan costs before the loan is even approved. This is also an unsecured loan. But I never borrow more than what I can pay back in full in 6 months or 12 months. I have been in business for a while, I put aside capital to buy houses, I use credit cards for cash flow only, I can always pay them back in full if I wish. Therefore I am never in danger of getting into financial trouble doing what I do. No, I am not lucky, I worked hard to put myself in that position.

Q5: Do I recommend that you buy houses using credit cards?
Answer : NO, YOU CAN GET HURT !!! Unless you are financially established, have good control over your finances, you can create big credit card debts in a very short time, or be unable to pay it off when the introductory rate expires, and the regular rate of 16% or 18% kicks in. When I borrow from credit cards, I make monthly payments of $3000 to $5000 to pay off the loan before the introductory rate expires. So this is not a game for the young investors or newbies with limited resources.

Q6 : Why do I buy houses with cash?
Answer : To beat the competition. I buy houses way below the market value (40% to 60%). The actualy cost is relatively low and affordable to me. When I offer cash, the motivated seller has to decide to accept my lower but reliable cash offer, or a higher/same offer from a buyer waiting on a mortgage loan that may/may not be approved.
Sometimes, the less motivated seller may take a chance on the mortgage with a higher offer, but most of the time, they’ll rather grab the cash in front of them than to take a chance that the mortgage may fall thru.

In short, despite the fact that I use credit cards to buy houses regularly, I do not recommend it to the newbies looking for capital for their first or second deal, you may get in trouble very quickly. For more seasoned investors, do it only if you have very good control of your finances.
Discipline and sacrifices may be required if you want to pay off the loan before the rates goes up.

Good Luck to all,
Millie I.