Creative Credit Card Financing To Build/flip Home
I would like to pull $25000 out of a 0% credit card, use $10,000 for a down payment on a $90,000 lot, build a house on the lot and flip it. The rest of the CC money I would put into a high interest account and slowly draw it out to pay the construction loan note and the minimum credit card payment while the house is being built. I would hope to build and sell the house within the year the credit card 0% offer runs.
I have excellent credit (812 I think) so should be able to get card
For a year I would have no out of pocket expenses
Using round numbers, 6% construction loan, 4% high interest savings = 2% interest out of pocket
My question, is this feasible assuming everything went my way?
Congratulations on a great credit score.
I think you will find that the banks will insist the building lot is owned, free and clear by you and used as collateral for the construction loan.
When banks foreclose on properties they do not like spending more money on an already bad deal.
If you run into trouble which you probably will if you have 0 experience. The bank would be forced to buy out the first mortgage on the building lot, that their property, house is sitting on.
Thank you. It is true I have little experience hence my reason for asking.
My plan would be to do a construction loan where the lot loan is rolled into the loan. I pay interest on the loan and the draws until the house is complete and the loan is converted from a construction loan to a permanent one.
Is my thinking sound?
When I first started out, I used credit cards... if you can pull it off, go for it.
watch out for cash advance fees.
I have never seen a 0% card that would allow free cash advance.
You need to double check the getting the lot cost rolled intot he note. SO far none of the banks we deal with allow that these days - Wachovia, Bank of america, national city, etc. They are all asking that the lot be owned already.
What you are saying is feasible but risky if you are inexperienced. I say try something smaller first. Maybe a house needing light rehab or something like that.
We just finished a project that I funded with BTs and it was not a problem but I was very careful about inflating the building and holding costs to make sure I would not go over budget. The project was to be 3 months but with city delays and delivery delays it stretched to 6 months. Also, I made sure the numbers would work even with a bad market.
For the person talking about the fees, except for Chase none of the BTs I have done have had fees. A few weeks after gettign the CC usually the card company will send the BT checks or put the offer in your online login account. Cash advances carry the fees but not all BTs are treated as cash advances.
Sunny, all properties will not cash flow. All areas will not cash flow. You need to find an area of town that cash flows. Find an area where rents are high and prices are low...
Cycledog
You might also try looking at a multi unit place. Often these can cash flow if you have all units rented.
Almost ALL Properties have POSITIVE CASH FLOW! It is up to you to structure the financing to suit your situation. There are many transactions that are NOT 20% Down - 80% New Conventional Financing.
Financing is a personal thing, one person may have 100% Equity or 50% equity or 10% equity. The amount of financing & the terms of the financing determine the payments. In a properly maintained Investment, the only variable you have is the financing payment. Owner Carry Back financing is where you have the most ability to "Tailor the Payment".
You can bargan on many things. a few for illustration are as follows; the Interest Rate, Amortized or Not, Length of Amortization Period, Prepaid Interest, No Interest, Stepped Interest that varies over a period of time, or some other variation of payment, that makes sense to the buyer and is acceptable to the Seller.[ Edited by pmatheson1 on Date 07/20/2007 ]