Welcome to the Tax Sale Podcast, where tax sale investing is made easy. My name is Casey Denman, I’m a tax sale veteran, the leading tax sale expert, author of The Tax Sale Playbook, founder of The Tax Sale Academy and I’m your host right here on The Tax Sale Podcast.
Thank you so much for joining me on today’s podcast episode. This is a completely free podcast and is brought to you through and because of The Tax Sale Academy. If you’re looking to learn more about investing in tax defaulted real estate, just head to TaxSaleAcademy.com. Again that’s TaxSaleAcademy.com.
On today’s podcast episode I want to discuss an alternative funding method. I am frequently asked questions related to funding tax sale transactions. And when I look at my data, I always notice the the episodes related to funding your tax sale purchases are fairly popular. The fact remains that you must have money to invest. You’re investing money here, right?
What many people don’t realize, but something I write about in Tax Sale Playbook is that when I started I saved some cash and then added some more from my partners to acquire my first tax sale properties. Now, these partners didn’t even really know they were my partners. And I was ok with that. They also charged quite a bit to use their money, but I was ok with that too. Their names were Visa, Visa, and Mastercard. That’s right two visas and one mastercard contributed to my first purchases.
As you start out if you have a lack of capital, it’s extremely important to be creative. The money is there. It’s waiting to be invested. It’s waited to be used to make more money. And if you don’t have any or much money starting out, then it’s up to you to find exactly where the money is waiting. And even if you’ve been investing for years and years, it’s a lot better to make money using OPM or other people’s money than your own. That’s the reason many extremely successful investors still utilize financing.
So, how can we best utilize credit cards for tax sale investing? How can we buy land utilizing our cards?
There are two primary ways. We’ll discuss them first, then we’ll get into some of the details.
The first way is to simply swipe your card. There are many auctions that will accept your credit card directly. In some scenarios, you’ll simply hand them your credit card. In others, you’ll provide your credit card information online. Either scenario is the same result. It’s exactly like shopping for groceries at the grocery store. This will be the preferred method most of the time if you are going to utilize a credit card simply because it’s so easy. Now, most auction companies will charge you a surcharge. They’ll label it as a convenience fee, processing fee or some other random name. But, it’s a surcharge for using your credit card. And the reason is that they must pay to process your credit card. They’re charged by their merchant processor. You can get the amount of their surcharge from the company directly, but it’s typically around 3%. And again, that’s added onto your bid. A $1,000 winning bid becomes $1,030. Not a big deal, but be sure to factor it in. After the purchase, it’s simply like any other credit card charge.
The second way to utilize credit cards are through cash advances on a card. If you have available credit , but your auction does not accept credit card directly, then you can consider getting a cash advance if your card offers it. This is simply a way to provide you with money by utilizing your available credit. And it could be deposited into your account, they could mail a check or a number of other ways. The difficulty with this method is there is often a usage fee attached to the initial amount plus you could get charge a higher rate than normal. For example, if you need $1,000 you could get a $1,000 advance, but they’ll charge you say 5%. So right out of the gate you owe $1050. Then instead of your normal interest rate of 14.99% an advance might be at 24.99%. Obviously, these are just examples, so be sure to check with your card issuer for details. BUT, if that’s the only way to get started and it makes sense, then go for it.
Now that we’ve discussed HOW you use cards, let’s discuss a few extremely important aspects of using them for tax sale purchases, followed by a few tips on using them:
First, you must be extremely aware and confident of what you’re doing. The absolute worst thing you can do when it comes to using your credit cards is make a bad investment. Then you’re stuck owing the card issuer what you spent, more and then interest on top of it all. So be very sure of your numbers.
Another one is to be certain of your holding times. Credit card interest rates are much higher than most other types of interest. And because of this, these interest rates can eat your entire investment very quickly. If you’re looking to make 15 or 20% and it’s going to take you a year to do it, then odds are you’ll end up losing money. So keep that in mind.
Something to mention here is that if you don’t feel you can be responsible with your cards and using them for your investments then don’t do it. It’s not worth the risk. My suggestion is to use the cards, sell the properties and pay off the cards as quickly as possible so that you can build up your capital and acquire bigger and bigger properties without the use of the cards. And perhaps eventually transition to some other certain of borrowed funds, like a signature loan or HELOC is you’re looking to use OPM.
So let’s discuss a few tips on using them now.
Look for some sort of special offer. If you have a decent credit score you probably get offers all the time. And I’m not talking about opening a bunch of new accounts or anything like that, but I’m talking about balance transfer type offers. In some situations you can transfer balances from one card to the next without any fees or with very minimum fees all while taking advantage of 0 percent interest rates. This will allow you to use one card for the transaction, transfer it to another card and then carry that balance interest free until you sell your property.
Another tip is to find cards that offer cash back rewards. Now, there are debates, websites, blogs, YouTube channels and all sorts of other stuff that can help you compare all of the rewards systems. But I personally am a fan of cash back rewards. What you can do is get a card that has a 2% cash back, for example. Use the card for purchase and even if you’re charged a surcharge of sorts, it becomes minimal. That 2% surcharge disappears or that 3% surcharge gets reduced considerably, just by choosing the correct card to utilize. Then you can combine that with a balance transfer offer of 0% and you’re golden.
The other thing that might be helpful for some is to set aside one credit card just for deposits. When you get to the point of biddng at multiple auctions, you could be expected to place a deposit at every single one. If it’s a $1,000 deposit for 5 auctions, then you have $5,000 just sitting there that can’t be used. Now usually it’s just a hold so you aren’t charged interest, but that hold might last for up to 30 days. So consider having a card dedicated to just that.
So, there it is. That’s how you invest in tax defaulted real estate using credit cards. It can be an incredible way to get started IF you do it correctly and have the self control.
Hopefully you’ve enjoyed this podcast episode and found it helpful in your tax sale business. If so, please take just a second to leave positive feedback on whatever podcasting platform you’re listening to us on right now.
And if you’re looking for more information about tax sale investing, there are a bunch of links in today’s show notes that will take you to all of the resources we’ve put together for you. One of those links will take you to TaxSaleAcademy.com where you can get a free copy of my book, Tax Sale Playbook if you just cover the nominal shipping cost, or you can also joing the academy for the most advanced step by step training we offer that includes all of our training programs. And again it’s at TaxSaleAcademy.com.
Take care and make it a successful day. See ya!