Hi,
I am new to property investing and have recently read “From 0 to 130 Properties in 3.5 Years”. That was a great read!
I would like to follow a similar hard boiled property acquisition scheme i.e. purchase a number of positive cash flow properties. In the interim, I am trying to organize my financial situation. I am slightly in debt, but should be out of credit card debt by next month – phew!
During the period where I was in debt I was able to attain the following credit cards:
CBA Gold ($7,500)
– has annual fee, 55 interest free days, about 18% interestANZ Rewards ($10,000)
– has annual fee, 44 interest free days, about 18% interestVirgin ($2,000)
– no annual fee, 55 interest free days, about 13% interestShell ($20,000)
– I cancelled this one recentlyIs there any advantage to having credit cards when following Steve McKnight’s methods? I am also looking at the following ideas:
1. Paying the 10% deposit with a credit card; quickly renovating the property; then selling it before the interest period ends (or shortly after).
2. Using the credit card for property renovation purposes and gaining credit card reward points through this
3. The effect having credit cards will have on attaining a home loan
As I don’t have much cash on hand, I was thinking of acquiring a property; renovating it; then selling it on the market to get some equity. This will aid in my medium to long term goals which are to hold onto positive cash flow properties. Would credit cards help here?
Or should I just get rid of all my credit cards and use a debit card? I want to minimize my expenses as much as possible.
Any pointers and help would be most appreciated!
Thanks!
voirinHi Voirin & welcome to the forum,
The Majority of lenders assess credit cards at 3% of the maximum limit, so this will have some effect on your borrowing capacity.However certain lenders will disregard credit card exposure providing you supply monthly statements showing the balance is swiped before interest is incurred, Cheers.
Regards
Steven
Mortgage BrokerMobile Mortgage Market
Ph: 0402 483 216
[email protected]
http://www.mobilemortgagemarket.com.auPLEASE note comments made should not be taken as specific taxation, financial, legal or investment advice.
Hi Voirin
I discovered on the Wizard home loan on-line calculator that a credit card with a $10,000 limit reduced the amount of the loan I could have by $55,000 & when I asked my Mortgage broker he said that can be the case. This is even when you have a zero balance o/s on the card. So theoretically if your cards are worth around $40,000 does this reduce your borrowing capacity by $220,000? I could be completely wrong of course but financial institutes seem to work in weird & wonderful ways particularly the CBA which I will not be using again for future investments.
Once you have ditched your credit card debt would you not do better to set up a line of credit for your deposits & expenses? Then you could also ditch the credit cards.Sparky
Voirin,
The cards themselves are not a real problem. Being in control of your personal debt is.
In your case using them for a business expense (renovation) is sound as long as you are adding true net value to the properties and you can get your capital back in time to account for the interest cost.
Good Luck.
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NZ Investors & Property Spotters
Renovations & Project ManagementDon Nicolussi | Mortgage Broker - Home Loan Warehouse
http://homeloanwarehouse.com.au
Email Me | Phone Me"I think of finance as a technology, a way of getting things done." Robert Shiller
You hit the nail on the head Don and Liz, people seem to cut up their credit cards because they themselves are out of control. Just like people don’t want to have certain foods in their fridge because they have no self control to keep away from it.
Funny that!!!
We buy properties in Adelaide. Immediate Cash Settlements, No Real Estate Agents, No Fees.
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phone 0412 437 582Hi Dr X,
So true and why is it that when someone does open that packet of tim tams in the fridge we have to eat them all?? Who knows??
Cheers
[email protected]
NZ Investors & Property Spotters
Renovations & Project ManagementDon Nicolussi | Mortgage Broker - Home Loan Warehouse
http://homeloanwarehouse.com.au
Email Me | Phone Me"I think of finance as a technology, a way of getting things done." Robert Shiller
I like to have 0 personal debt so C/cards are not an option for me other than buying the odd meal from time to time.
A C/card with a 1,000 + limit is personal debt.
regardshttp://www.owner.com.au
http://www.owner.com.au/phototour/listing_phototour.cfm?listingid=20440
http://www.owner.com.au/phototour/listing_phototour.cfm?listingid=21772
http://www.owner.com.au/phototour/listing_phototour.cfm?listingid=22315Hi voirin,
I think a credit card can be useful in purchasing renovation goods and items for renovation or paying rates and water cost etc and keeping track of costs.
HOWEVER you must pay it down completely and I am certain I would not be using the available cash for a “deposit”.
Would that not defeat the purpose of buying Positive property . Huge interest payment would certainly knock any benefits around.
Good luck and cheers for now Lenhi there,
The 3% the bank calculates on the credit cards for your minimum monthly payments are based in the AVAILABLE LIMIT, not what you currently have outstanding. its called risk assessment on the bank’s behalf. So this can dramatically reduce your lending capacity even if you are not using the cards.
Also, the banks are wising up (and have been for some time) so if you make a lot of large purchases throughout the month and pay off the balance each month on your cards to gain points, they will suddenly be very interested in your spending habits. They can also force you to move to a card without points if they believe your are doing this for a commercial gain.
What I would suggest doing is closing your CBA and ANZ cards and IF YOU NEED IT ask virgin to increase your credit limit. The interest to pay on the virgin card is much less if anything goes wrong and you can’t pay up before the end of the interest free period.
Sounds like you need a line of credit, not credit cards. also if you can keep your receipts etc the interest paid on the line of credit can be deductable when it comes to tax time.
You have to be very careful when renovating and on-selling but I’m sure your aware of the costs involved, taxes etc. can be very costly.
If you dont have property to get a line of credit on, another way is an unsecured personal loan but the banks always want to know what your going to use the money for, and mostly pay it in bank cheques, however independant finance companies will lend with security of a vehicle if you have one (for a higher interest rate of course) – i just went down this option and wouldnt recommend it, I borrowed $15K, repaid $2500 over 5 months and when I paid it off, had only paid $300 from the principle of the loan. I still dont understand that and I work in finance.
Good to see your thinking outside the square to fund your goals! Good luck.
Dohicky
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