Free Money? Can You Build a Real Estate Portfolio with Zero-Interest Credit Cards?

Juggling 0% interest business credit cards is like juggling torches in a hay-covered barn. Drop one, and the whole place goes up in flames. However, if you are disciplined and know what you’re doing, they could be a great asset in helping you kick-start your real estate investing career.

Getting a 0% Business Credit Card

There’s lots of information online regarding 0% APR business credit cards. Most offer 0% interest for 12-18 months. This makes them well-suited for real estate projects that can be refinanced or sold, allowing you to pay back the cards before interest starts to kick in. These cards are relatively easy to get, provided you have good credit and a business entity.

But don’t expect to get hundreds of thousands of dollars right away. Once you have used and paid back the initial amounts borrowed, lenders tend to gradually increase the amount they can lend to you. It’s not unusual to get $50,000 to $100,000 with your first round of funding with excellent credit. 

Because the 0% APR expires after 12-18 months, it’s not a good idea to keep using the same card beyond the expiry date. Rather, you will have to get a new card to benefit from a new introductory 0% APR. The more borrowing and payback cycles you go through, the more your credit will be extended. 

If you’re using a broker to help you apply for multiple cards, as I have, talk to your accountant about writing off the broker’s commission and any fees charged for using the cards as cash to make purchases or pay contractors.

The Painful Pitfalls

If you get several business credit cards at once, I’ve found it difficult to stay on top of each one, especially in the midst of a renovation. Each card needs the principal payment to be paid on time, and if you are a day late, say goodbye to your 0% introductory period. You’ll find yourself paying up to 30% interest. It happened to me, and I could only get some relief when I refinanced the home and paid the card in full. 

Using a 0% Credit Card to Build a Real Estate Portfolio

Investor Rick Matos from Lehigh Valley, Pennsylvania, told BiggerPockets how he purchased entire houses in run-down areas of Allentown using credit cards, which he then fixed up and refinanced into conventional loans. Rick’s is a classic case study because the houses he purchased were extremely cheap—often $10,000 to $20,000. However, soon after he refinanced them, the area went through a massive cycle of urban renewal and price appreciation, which rapidly increased his rent, allowing him to pay down his mortgages and increase his net worth. 

Detroit investor Ashley Hamilton made a similar move, telling Business Insider (a story that also ran on Yahoo!) how she purchased 35 units across 30 properties over 14 years with 0% balance transfer credit cards. 

Hamilton’s blueprint is one all investors can follow: She accessed her money via convenience checks provided by the credit card company and deposited the money directly into her checking account. After fixing up and renting out her properties (as with Matos, some of these houses were as cheap as $10,000), she paid off her balance transfer debt with rental income, cash-out refinancing, or tax refunds. Hamilton’s advice was to open credit cards that offered cash rewards and the 0% balance transfer rate, thus kicking back cash to help her repay the loan or use it on future projects. 

Homes Around $100,000 Are Ideal Vehicles to Scale in Today’s Market

Using credit cards to build real estate portfolios sounds like a move from the land that time forgot, i.e., directly after the 2008 financial crash. Back then, low interest rates and burnout from the financial crash left banks looking to offload thousands of homes for pennies on the dollar. 

But while this old-school playbook might seem dated with high prices and low inventory, it’s not. There are many cities where you can buy decent homes for just over $100,000. If you have a card with that much available credit, borrowing the rest of the money to renovate and refinance will allow you to pick up many such homes. 

Alternatively, you can do the same thing by getting traditional mortgages (assuming the home needs modest renovations), using a zero-balance card to renovate, and pay it back with the cash flow you generate. This requires expertise and market knowledge to ensure the card can be fully paid back within the 0% introductory period. However, if you are unsure of what your house will rent for, this is not a move I recommend.

Using a 0% Credit Card to Flip a Home

House flipping works similarly to buying cheap homes in depressed markets and fixing them up to refinance and pay off through rental income. However, if you are flipping a house in a more expensive market unless you have a large 0% line of credit to purchase an entire home, you’ll have to be selective on how you use your cards.

This is because some lenders might want to know the source of your funds if you attempt to get a mortgage, and they might balk at the idea that you borrowed money to borrow money. A workaround is to deposit the money into your bank account and let it season for three months, but you are always working against the clock, using up your introductory zero-interest period.

The most obvious way to use 0% credit cards for a flip is to get a regular mortgage on a home and then use the zero-balance card to pay for appliances and renovations. If you intend to keep the house after it has been renovated, you’ll need to refinance the property or be confident enough that your cash flow will pay back credit cards before the 0% introductory offer expires. Renovations and budgets usually run over, as does the time to market and lease a property, so consider all this when deciding whether to use a business credit card. 

0% Credit Cards and Short-Term Rentals: A Match Made in Heaven

Zero-APR credit cards are the perfect vehicle for a short-term rental business. If you have an existing property or are arbitraging one, fixing up the home to make it appeal to vacationers requires expenditures for TVs, beds, and decor. It can amount to a lot of money. However, the rental reward can be huge—over three times as much as a regular rental, depending on location—allowing you to pay off your card quickly and reap high profits. 

This is a technique I’ve used myself, and it’s relatively safe if you are sure you can get the rent you need. In my case, I had a lease signed with an arbitrage tenant—we agreed to split the cost of the furnishings—before I spent a penny on the card.

Also worth looking into is installing an accessory dwelling unit (ADU) next to your STR or primary residence for additional income. These tend to range from $60,000 to $225,000. Using cards to buy or renovate and pay back with rent or via refinancing can increase your long-term cash flow.

A new wave of striking new tiny homes—ideal for short-term rentals—have recently come on to the market, starting at $20,000. This makes them well suited for credit card purchases, as banks won’t touch such small loans. 

Final Thoughts

If you don’t have the security of a W-2 job or savings as a backup, you are walking a precarious financial tightrope when using zero-interest credit cards. In real estate investing, one thing generally holds: Things never go as planned. 

However, with a monetary cushion and the understanding of how to best deploy zero-interest credit cards, they can be a tremendous asset, allowing you to bypass hard money lenders and build a foundation for financial freedom. 

Be warned, though: These instruments come wrapped in yellow caution tape. Indeed, 0% interest credit cards are not recommended if you’re an unorganized person or do not have someone working alongside you who is organized. Neither would I recommend them if you didn’t have a fail-safe bailout strategy such as a HELOC or emergency funds should you find yourself in over your head.

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.