Tuesday, August 23

How I'm Funding House #9

The last couple of years I have spent all my free cash paying down debt. I know this was the best use of my cash, but of course that means I don't have a pile sitting around to buy a foreclosed home.

The purchase price of the house is $22,500 and I funded the $1,000 deposit with funds in my checking account. I think I will get a credit for property taxes that will have to be paid at the end of the year so I'm looking at a $21,000 outlay. So where to come up with the money?

Credit cards.

That's right, I'm buying a house with credit cards. More specifically, I am taking advantage of two balance transfer offers. Both offered me a 0% interest rate (instead of transferring a balance I wrote a check to my bank and deposited the funds into my checking account) for 18 months. I did have to pay a hefty fee for the privilege of initiating the transfer (3% on one card and 5% on the other, or a total of about $925), but that's a fair price considering I won't pay any interest on the money for 18 months.

So my goal is to pay off this house in the next year and a half. I need to pay about $1,200 toward the balances each month. About half of that will come from the rent I get on the house. I think I can come up with the other half from rents and mystery shopping income.

4 comments:

  1. Buying the house with 0% credit card deals should be a pretty smart strategy. My credit card company is offering me a 0% deal with just a 2% transfer fee. I have about $8000 credit available on that card but I can't figure out what I would use the money for so I probably won't take advantage of the deal.

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  2. Andy - why not invest in a conservative dividend stock or bond? Sure, there's the chance that it could lose value, but it could also increase in value. Use the dividends to make payments and then sell the stock or bond when the 0% is about to expire and make one balloon payment.

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  3. Its hard for me to conceive of buying a property that could pay itself off after ~4 years around here (Raleigh, NC). My rentals have positive cash flow, but are on the 25+ year payoff plan.

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  4. 2million,
    Hopefully I've found my niche. Early on I bought a few new houses to rent. While I spend less on repairs and maintenance, it's really hard to stay cash flow positive considering their higher purchase price and resulting mortgage.

    What I look for instead are cheap foreclosures in decent but not glamorous neighborhoods. In other words, I'm not scared to walk around the area but wouldn't necessarily choose to live there myself.

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