Forums » Credit & Credit Repair Forum » should I use personal credit cards for rehab?

should I use personal credit cards for rehab? 7 posts by 4 users

Adam S.

Posted: 06/11/2008 at 01:52PM

Hello.

My plan is to start rehabbing in Texas and then acquire some SFR rentals and hopefully some multifamily.

I've decided against forming an LLC at this point because I have yet to do a deal and the only assets I have are my home which is homesteaded and a car with 100,000 miles and some serious hail damage. I have every intention of eventually doing REI full-time but I will NOT quit my day job until it's a realistic possibility.

I would like to start an LLC and start to build business credit but since I haven't done a deal it seems like a waste of money until I know I can do this.

I am going to file for an Assumed Name(DBA) with the County and open a business checking account for the $10K-$15K startup capital I have and also obtain a EIN so I don't have to use my SS#.

My question:

Is it okay to use my personal credit cards to cover rehab cost that will be reimbursed by my HML?

As a sole proprietor do I face any issues Doing Business As " newbie321" and then using MY personal credit? ( I think the answer is no since it all flows through to personal taxes anyway)

The reason I want to use personal cards is because I have good credit score(771), $27,000 worth of credit divided up over 3 cards all with ZERO balances and I don't want to give a personal guarantee for a new business credit card and harm my personal credit.

Any comments or suggestions are always appreciated. CHEERS

Sponsors:

Frank A.

Loveland, CO

1085 posts

Posted: 06/11/2008 at 06:12PM

It wouldn't be my preferred way, but as long as you can walk the debt or pay it off quickly enough, it'll be OK. Have you done rehabs in TX before? Rehabs anywhere?

all cash

Adam S.

12 posts

Posted: 06/11/2008 at 06:42PM

Thanks for your reply.

It's certainly not my preferred my method either but I would only use credit cards for short term debt that I know I can pay off and use my startup capital for anything else.

I haven't done a rehab yet but I'm ready get my feet wet.

Frank A.

Loveland, CO

1085 posts

Posted: 06/11/2008 at 09:07PM

Learn as much as possible about how to do each job, plan the jobs so you're doing them in some sort of logical sequence, and remember this;

EVERYTHING TAKES LONGER THAN YOU THINK, AND COSTS MORE THAN YOU BUDGETED.

all cash

Adam S.

12 posts

Posted: 06/12/2008 at 10:25AM

Thanks for the advice. It's always appreciated when veterans take the time to educate us newbies.

P N.

456 posts

Posted: 06/12/2008 at 11:12AM

You new DBA won't be able to get any credit until it is very well established, and even then you will have to sign personally for the debt.

When yo get an LLC, you ust very carefully separate your private finances from your LLC finnaces, or eles you lose the protection of the LLC.

You might need to make loans to your DBA,. Check with your accountant to see how it works in your state.

I use my credit card for rehabs. If you have good credit, your card rate should be as low or lower than you'd pay to borrow money anywhere else. There is no loan processing fee for credit card money.

My card is 8.5%. I can't get a home improvement loan, or line of credit, for less, and that would have application and processig fees, and usually involves an appraisal.

Just don't be using that credit card unless you know where the money is coming from to pay it back real quick.

David H.

7 posts

Posted: 07/03/2008 at 07:47AM

If its a short term strategy then yes, but if you think it'll take you a while to repay the money then you should try other methods, reason being, credit card debt builds up pretty quickly compared to a loan or other forms of financing.