Earn big returns on your real estate investments by strategically using credit cards.
As a real estate investor, you know that expenses are an inevitable part of the game. Whether you're a DIY enthusiast or a contractor, investing in real estate involves various costs. But did you know that using credit cards for your real estate projects can actually boost your returns? In this article, I will guide you on how to make the most of credit card rewards to invest in real estate and increase your profits.
How Credit Cards Can Earn You Big Real Estate Returns
If you're not using credit cards for your real estate ventures, you're leaving money on the table. Credit cards offer a wide range of rewards, such as cash back, points, and miles, which can significantly contribute to your bottom line. Whether you already have the funds for your project or need financing, credit cards can help you maximize your returns.
If You Already Have Money or Financing
No matter how you obtained the funds for your real estate investment, whether through a hard lender, refinancing another property, or a home equity line of credit (HELOC), using a rewards credit card is essential. By making all your project expenses on your credit card instead of cash or debit cards, you can earn between 1% to 20% back on your spending, depending on your credit card's rewards program.
The key is to always pay off your credit card balance in full each month to avoid interest charges. By using the money or financing you already have to clear your credit card balance, you can enjoy extra profit in the form of points, miles, or cash back. These rewards add to your bottom line and increase your returns on investment.
Let's look at a real-world example. Suppose you're planning to spend $20,000 on a flip. Instead of using cash or debit cards, you use a rewards credit card like the Citi Double Cash® Card, which offers up to 2% cash back. On that $20,000 purchase, you earn $400 cash back. However, you can further optimize your rewards by opening a new card with a lucrative sign-up bonus.
For instance, the Ink Business Preferred® Credit Card currently offers 100k bonus points after spending $8,000 in the first 3 months. By using this card for your $20,000 purchase at The Home Depot, you not only meet the spending requirement but earn 100,000 Chase Ultimate Rewards points. Depending on how you redeem these points, they can be worth up to $1,250 in cash back or travel rewards.
Additionally, you can earn ongoing rewards on your purchases. With the Ink Business Preferred, you earn 3X points on the first $150,000 spent on eligible purchases and 1X points per dollar on all other purchases. Imagine the potential rewards you can accumulate by leveraging multiple credit cards throughout the year.
If You Need Funding for Your Project
If you're still figuring out how to fund your flip or renovation, credit cards with 0% APR on purchases can be a valuable tool. These cards offer an interest-free period, typically ranging from 12 to 21 months, allowing you to finance your project without incurring high interest charges.
In this scenario, it's crucial to use a 0% APR business credit card, as many of them do not report your activity to your personal credit history. This prevents your personal credit score from being negatively affected by high credit utilization. By choosing the right card, you can take advantage of the interest-free period while protecting your personal credit.
For example, let's consider the same $20,000 expenses. If you were to use a credit card with the average interest rate of 17%, you would pay approximately $1,753 in interest fees over 12 months. However, by using a 0% APR credit card, you save that $1,753, which can be directed towards paying off your balance or funding your next real estate project.
Furthermore, you can still earn welcome bonuses and rewards on your purchases, similar to the previous example. By combining the benefits of an interest-free period and rewards, you can maximize both your cash flow and returns.
The Best Credit Cards for Real Estate Investment
When it comes to credit cards for real estate investment, choosing the right one is essential. Look for cards that align with your spending habits and offer compelling rewards programs. Here are some of the best business credit cards that I recommend:
Ink Business Cash® Credit Card
- Welcome offer: Earn $900 bonus cash back after spending $6,000 on purchases in the first 3 months
- Rewards rate: 5% cash back on office supply stores, internet, cable, and phone services; 2% cash back on gas stations and restaurants; 1% cash back on all other purchases
- Intro APR on purchases: 0% for 12 months, then 18.49% - 24.49% Variable
Ink Business Preferred® Credit Card
- Welcome offer: Earn 100k bonus points after spending $8,000 on purchases in the first 3 months
- Rewards rate: 3X points on travel, shipping, internet, cable, phone services, advertising purchases on social media sites and search engines; 1X points on all other purchases
- No introductory APR on purchases
Ink Business Unlimited® Credit Card
- Welcome offer: Earn $900 bonus cash back after spending $6,000 on purchases in the first 3 months
- Rewards rate: Unlimited 1.5% cash back on every purchase
- Intro APR on purchases: 0% for 12 months, then 18.49% - 24.49% Variable
The Blue Business® Plus Credit Card from American Express
- Welcome offer: Earn 15,000 Membership Rewards points after spending $3,000 on eligible purchases in the first 3 months
- Rewards rate: 2X Membership Rewards points on eligible business purchases up to $50,000 each year; 1X points on eligible purchases after that
- Intro APR on purchases: 0% for 12 months, then 18.49% to 26.49% (variable)
Citi Double Cash® Card
- Welcome offer: Earn $200 cash back after spending $1,500 on purchases in the first 6 months
- Rewards rate: 2% cash back on all purchases
- No introductory APR on purchases
Each of these credit cards offers unique benefits and rewards. Consider your spending patterns, the welcome offers, and the ongoing rewards rates to determine the best fit for your real estate investment strategy.
Choosing the Best Credit Card for Real Estate Investment
When selecting a credit card for real estate investment, consider the following factors:
Rewards
The goal is to maximize the rewards on your everyday purchases. Whether you prefer cash back, points, or miles, look for a card with a generous welcome offer and an earning rate that aligns with your spending habits.
Intro APR Offer on Purchases
To improve your cash flow, consider a card with an introductory 0% APR offer on purchases. This allows you to make necessary purchases for your real estate business without incurring interest charges for a certain period.
Low or No Annual Fee
Annual fees can eat into your rewards unless the value you receive from the card justifies the cost. Look for cards with no annual fees or ones that provide sufficient benefits to offset the fee.
How Far Can You Take Your Credit Card Rewards?
For experienced points and miles enthusiasts, the sky's the limit when it comes to leveraging credit card rewards. You can even use your rewards to buy an investment property. By accumulating significant cash back or points, you can use them as a down payment or cover the closing costs of a rental property.
During economic downturns, when housing prices may decrease, credit card rewards can be a valuable source of funds. Instead of depleting your cash reserves or taking out a loan, building up free money through credit card rewards allows you to invest in your next project without incurring additional costs.
Methodology
The credit cards recommended in this article were selected based on extensive research and expertise. We considered the potential value each card offers, including welcome offers, benefits, and rewards. The presence of annual fees was also taken into account when compiling this list.
Please note that not all available credit cards have been included in this article.
Conclusion
By strategically using credit cards for your real estate investments, you can maximize your returns and earn substantial rewards. It's crucial to have a clear repayment strategy and to pay off your balances in full each month. Credit cards with 0% APR offers provide an excellent opportunity to finance your projects without incurring interest.
Although investing in real estate carries risks, credit card rewards can help mitigate potential losses. By taking advantage of sign-up bonuses and ongoing rewards, you can turn every purchase into an opportunity for extra profit. So start leveraging credit card rewards and watch your real estate investments flourish!
