credit cards to buy real estate - Posted by Richard(WA)

import · February 13, 2001, 2:04pm

Posted by BillW on February 13, 2001 at 18:59:19:

Yes, just go to the bank on closing day and get the money from the teller.Try to up your limit though. If you’re right at the max, they may deduct the cash fees on the spot and you might not have enough money.
Also, a couple other things:
Make sure the lots are buildable. Very sure. Check requirements from planning and zoning in the area that controls the property. Make sure there are no other things that may prevent you from building in the future. I once almost bought a cheap lot that had a fault line running right through it. Local rules forbid building within 50 feet of a fault line. When you took off that 50 feet, what was left was too small to build ANYTHING on at all. Had to pass on that one. Try to get seller to guarantee that lots are buildable, if you can. Also, make sure, if you can, that authorities won’t prevent you from “camping” on your own property.
Good luck and enjoy it.
BillW.

import · February 13, 2001, 2:04pm

Posted by Richard(WA) on February 13, 2001 at 15:04:13:

Hi folks

Here’s an idea I’ve heard about, and I’d like to know what you all think, and if anybody’s ever done this…

Has anybody ever bought property with credit cards? I mean, ENTIRELY with credit cards (plus, well, maybe a little cash)? How does this work?

Here’s my situation. I’ve always wanted to live out in the mountains. Being poor, that’s kinda a hard dream to realize. But I came across some vacant lots for sale, three at $3,500 each (equivelent lots in the area go for $15,000-$20,000 each). Vacant land is extremely hard to finance. I’ve even tried the hard money lenders and most of them have a minimum amount they will loan (like $15,000). And being poor, I don’t want to borrow more than I can easily repay. The seller wants all cash so he won’t take seller financing.

But what I DO have…is three credit cards…total credit limit of $3,500, all with zero balances. So my idea was to just use the credit cards to buy a lot, put a motor home on it, and I’d be realizing my dream and paying less on the credit cards than I’m paying in rent right now. Then I’d build a cabin on it (I got some contacts that would give me a huge discount on materials and construction). I ALSO like the fact that the entire debt is unsecured so in effect I’ll own the land free and clear. Sounds good to me!

So what do you guys think? Is this a good idea? How does one go about actually using the three different credit cards to buy this property? Would a realtor accept this??? I’m fairly sure the seller would, because to him its an all-cash offer. Fast money for him, too, since there’s no waiting around for loan approval, no points or origination fees…

Thanks to all in advance!!
–Richard(WA)

import · February 13, 2001, 8:43pm

Re: credit cards to buy real estate - Posted by dw

Posted by dw on February 13, 2001 at 21:43:37:

Wegot a cash advance and purchased a beat up old house for $8000. Putting $4-5 into it eventually. Rents are $350 for each of the two units, and we turned around and financed it with our bank at 9% interest for 10 years with an appraisal of $24,000. They loaned us $20K. We like our credit card deal.

import · February 13, 2001, 8:26pm

Re: credit cards to buy real estate - Posted by JD

Posted by JD on February 13, 2001 at 21:26:21:

when people say they bought a property with credit cards, they do not literally mean that. They mean they got cash advances on the cards to buy a property. I think the credit card idea is good. I would be more concerned in the lot. Whether it perks, whether a well can be drilled. How much an electric hookup would be. Whether it is zoned for what you want to do. etc…

import · February 13, 2001, 8:06pm

credit cards & REI - Posted by Anne-ND

Posted by Anne-ND on February 13, 2001 at 21:06:02:

Richard,

Good for you, coming up with this plan. Just a few quick notes: call your credit card companies and ask them for an increase on your credit limit and/or a decrease on your interest rate for the cash advance.

If you have a choice, always go with a credit card that calculates your interest based on the average daily balance rather than a 2-cycle billing method.

And although this doesn’t exactly pertain to your personal situation, search the archives for posts by Millie, who does incredible things with REI using credit cards, she has some good advice for people trying to do this.

Good luck,

Anne

import · February 13, 2001, 6:54pm

Re: credit cards to buy real estate - Posted by Brent_IL

Posted by Brent_IL on February 13, 2001 at 19:54:17:

Do you have an existing motor home, or will it have to be financed?

Many rural areas prohibit living on land without a septic system in place. There seem to be other restrictions as well (old Countryside magazines).

A man named Robert L. Williams wrote a book detailing his experience in building a 6000 SF log cabin for $15,000. Pretty much step-by-step.

import · February 13, 2001, 3:45pm

Re: credit cards to buy real estate - Posted by phil fernandez

Posted by phil fernandez on February 13, 2001 at 16:45:24:

Richard,

Let me begin by scolding you. You are not poor. Because you are thinking out side the box in coming up with creative ways of consumating your purchase. The truly poor person is the one who can’t see , nor wants to see solutions to situations beyond his nose.

A young fellow I know bought an old house that needed much work for $10,000 a few years ago. He took his credit cards and from them paid cash for the house, then used some more space on his cards to finance the $5,000 of improvements. Rented the house. The house fixed up is now worth $50,000. He next refinanced the house pulling refinanced dollars out to pay off his credit cards.

When using credit cards you do need to have a specific exit strategy to get the card balances paid off. You don’t want to be paying 18 - 21% on the money. In this case he of course placed a long term mortgage on the house. So yes using credit cards could work for you also with an exit startegy.

Your question on whether a realtor would accept this is immaterial. You are going to get cash advances from the cards to make the purchase, so it’s the same as cash as far as the realtor and seller are concerned. I wouldn’t even mention the method that you are going to use to produce the cash. Cash is cash.

Also if you can talk to the seller and see what his real needs are. Maybe he wants all cash, but doesn’t need the cash. Ask him what he plans on doing with the cash. Maybe he’s going to buy a truck. Why not buy that truck for him and use a 1.9% interest dealer incentive. Get him his truck for $15,000 with the dealer incentive and trade the truck for his land. You’ve just lowered your interest rate on borrowed money from 18 - 21% to 1.9%. Use your imagination and you can probably come up with something more attractive than using your credit cards for the purchase.

import · February 13, 2001, 3:18pm

Re: credit cards to buy real estate - Posted by David

Posted by David on February 13, 2001 at 16:18:53:

Is your seller a VISA merchant? ie:is the seller set up to accept credit card payment? I doubt it. Draw money from the cards as a cash advance, and then make use it to make a “true” all-cash offer.

import · February 13, 2001, 4:42pm

Re: credit cards to buy real estate - Posted by New_To_IL

Posted by New_To_IL on February 13, 2001 at 17:42:05:

I have used cc’s for a downpayment before, and here are some observations, some of which I have not seen pointed out here before:

First, there are some that have permanent interest rates in the 10-13% range. Not dirt cheap, but WAY better than 20%.

Second, cards vary as to how much cash advance and fees are possible. I have 2 cards which will each allow me to cash advance the entire credit line, and have a MAXIMUM cash advance fee of ~$30. Beware of cards that charge you a percentage with no maximum. Some cards will only allow small cash advances.

Third, yes cc’s have high monthly payments, but it’s NOT because of the high interest rate; it’s because of the short payoff time. cc’s usually require about 2-3% of the balance paid off each month. This is more or less like getting a loan on a ~5 year term. There is an upside to this, which is that a good portion of the payment is going to principal. Example:

Balance = $10,000
Monthly payment min. = 2.5%
Interest rate = 15%

The 15% is generating about $125 per month in interest. Your minimum monthly payment is about $250. As a result, even with the minimum payment, a full 50% of your payment is going toward principal.

Fourth, your minimum payment goes down as the balance gets paid off. I like watching the payments drop each month! And, if you get a chance to pay part of it off, the payment will drop proportionally, unlike mortgages which keep the same payment even if you put down extra principal.

Good luck!

import · February 13, 2001, 3:30pm

Re: credit cards to buy real estate - Posted by TD

Posted by TD on February 13, 2001 at 16:30:03:

Yeah - I think he’s got that part of the equation. The real question is - Is it a good idea to do so?

Only if you can make the payments each month. Keep in mind that consumer interest in the US isn’t tax-deductible, so it would offset whatever interest you’re paying on that property - and if it’s just land, you’d probably not be entitled anyway (ask your favourite tax advisor for details).

For very, very short term bridge financing of a sort, I might use it - only if I knew that I could replace the funds with some income or windfall in a short period of time. Otherwise I could see this spiralling out of control.

import · February 14, 2001, 9:02am

Re: credit cards to buy real estate - Posted by eric-fl

Posted by eric-fl on February 14, 2001 at 10:02:38:

what cards do you have that allow you to advance the credit line? Please email me this if you don’t want to post it. I think I’d like to sign up for those.

import · February 13, 2001, 9:05pm

Re: credit cards to buy real estate - Posted by David

Posted by David on February 13, 2001 at 22:05:32:

>Yeah - I think he’s got that part of the equation.

Judging by TD’s post about regarding maximum cash withdrawl limits, I’m not so sure… assume nothing!

Looking at it another way, I once used my Amex to make a down-payment to the dealer on a car purchase, and followed up with a cashier’s check for the balance. No need to worry about carrying cash, maximum withdrawl limits and so on.

I have not had such an account for several years, but I used to have a credit card that let me write checks against the account. A combination line-of-credit, credit card, I guess.

If the account provides you with such checks, I propose you go to the bank and write the check then and there, the day you need the money or the day before, and ask the teller to give you a cashier’s check in return for the amount you need. No need to worry about carrying cash, maximum withdrawl limits and so on.

import · February 13, 2001, 5:48pm

Re: credit cards to buy real estate - Posted by Richard(WA)

Posted by Richard(WA) on February 13, 2001 at 18:48:10:

Payments on $3,500 of credit card debt would not be a problem for me. My plan was just to make $500 a month payments on all the credit cards, so all my cards would be paid off again within less than a year–7 months plus the interest charges. I also checked into the cash advance limit and the cash advance limit is the same on all cards as the credit limit–so no problem there.

One little obstacle I DID run into though…Most of the ATM machines I know of have a maximum $300 a day cash withdrawal limit. Kinda hate having to wait over a week while I daily withdraw the maximum limit–there’s a charge for each withdrawal plus the hassle factor. How do I get around that? Just go to to my bank teller?

import · February 14, 2001, 1:38pm

Re: credit cards to buy real estate - Posted by JasonTX

Posted by JasonTX on February 14, 2001 at 14:38:59:

I have a Fleet Platinum Visa that allows me to do it. The phone number on the back of the card is

800-492-2500

import · February 13, 2001, 7:39pm

Re: credit cards to buy real estate - Posted by TD

Posted by TD on February 13, 2001 at 20:39:59:

Any bank teller with the Visa or MC symbol should be able to help you out - just bring two pieces of ID and your card.

Of course, you’d want to make the cash advance on the day of closing, and - if you’re skittish about carrying cash around - have the teller either give you a cashier’s check or bank draft - something traceable just in case.