Buying Real Estate with Credit Cards?!

Today is the start of a new 4-week series. Today we have Mohammed Javid. We met at BiggerPockets, and this is actually at the live event over in Florida. So super stoked to have you, Mohammed. Welcome to the channel.

Thank you.

Yeah, and so can you just share a little bit about who you are, some of your backstory, and what you've done in real estate?

Yes, sir. So my name is Muhammad Javed, aka Javed. So my Instagram is javed.realestate, one word, J-A-V-E-D dot real, R-E-A-L-E-S-T-A-T, one word. And I came to this country with $450, and I have to borrow $50 to open the bank account. So, so then from New York, I was in New York for a couple of years, and and I moved to Michigan. So I started educating myself into real estate, especially the creative real estate, creative real estate financing. And number of years I was kind of scared not to take action. Real estate are big transactions to do. So that was a perfect storm by 2008. So I have proper knowledge and properly equipped with all the seminars I have attended. Learned the creative financing, which includes seller finance, seller financing options, option to purchase real estate. I did some deals, those as well. And back in 2008, when recession came, so I purchased my first apartment building in a short sale. It has a loan of $364,000, so I end up buying it for $70,000 cash.

That, that works.

That, that is in the budget.

So $70,000 cash. What it does need, it has a bunch of problems. It comes with some problems. It has the tenants who are not paying rent. It does need the work, the rehab work, and they owe the property taxes for the last couple of years. It was heading towards foreclosure. So that's when I came into and I used my unsecured credit cards from different banks to fund the deal.

Okay, so you used credit cards. Did you do something like a cash advance? How did you do that?

0% checks in the mail. Whenever you go to the bank to get that credit card, so they gave you 0% from 12 to 18 months. That's normal when you apply for the credit card. So I added up over the years, so I have like around more than $150,000 credit cards unsecured without any collateral, just with a personal guarantee. And I used that money. I deposited those 0% checks into my bank account. So I used that money to buy my first apartment building.

That— so that was part of the— or that was all the $70,000 that you used to buy your first deal?

So $70,000 plus, I have to rehab it. I use the Home Depot credit cards. Those are also like special financing, 12 to 18 months. I use those to purchase the materials. The only money I have to give cash was the handyman. Okay. And then I use another credit card to fund that.

And so you did that to buy your first property. How did you pay off the cards to reuse them to buy more stuff?

That's exactly what I wanted to know. How did you actually pay them all the way down?

Yes. So what happened? So we have like 5 apartments and the retail store in the first floor. So I was having like more than $5,000 cash flow just to start with. As soon as I was done with this, so I have more than $5,000 coming and I paid the credit card. You have to make the minimum payment on it, as you know that. So you don't pay all of it. So you pay minimum payment. As the rents come, you pay that and you pay off same thing with the Home Depot credit cards.. And eventually I end up paying most of my deals between 3 to 5 years the most. Some of them I pay 12 years only. So 2 years, some of them I end up paying for 2 years. Within 2 years the credit card debt is paid off.

So you had to— you made your minimum payments on all the cards and you took the extra cash and just started paying one card off at a time until they were all paid off. Yes, sir.

That's awesome.

That makes sense for that price of market.

Mm-hmm. And so you have to have deals that cash flow enough fast enough to pull off that strategy, right? That's the, that's the main piece. It's based on projected cash flow.

So cash is the king when you have the cash and you're good with the real estate. So you can keep hunting until you find the right price. I don't buy until I— it's within my parameters. To pay it off within that time frame. Some of them I end up paying in 2 years, some of take 3 to 4 years. And let's say if I have one company, one LLC has 5 credit cards, like 5 lines of credit, and average credit card is like $10,000, which I have some $50,000 and plus as well. And then I use that to leverage. So I use that to buy it and then just pay it off in the process.

Yeah, that's great.

That makes sense.

And did you buy in your local market over in Michigan?

Michigan? Because in Michigan, if you have, let's say, let's say we have hypothetical 5 companies and you have 5 credit cards each, that's $10,000 each, like $50,000 each company, 5 of them, $250,000. For $250,000 cash, you can in Michigan, in a blue-collar neighborhood, you could easily buy 2 to 3 houses.

Yeah, that makes sense.

Makes a lot of sense to me.

And, and we make money that if we buy it, if we buy it at the right price, if we pay too much, you know, then of course, if we can take longer to pay it off.

Yeah.

So if you're buying these on a line of credit, you have 12 to 18 months, you said a lot of these you're paying off in the first 2 to 3 years. Are you doing like a balance transfer to a different zero interest card? Are you just paying them off in series? How are you managing the zero interest debt and trying to keep that down during the time.

If I have 18 months ending, so I keep track of it. Let's say after on the 17th month I have out of all those 5 other and other credit cards, they have 0% checks in the mail. I use them to deposit into my account and pay the other one off. That way, 0% interest. Actually, only I pay the transaction fee.

Yeah, that, that makes a lot of sense.

That does make a lot of sense.

So what's next for you? How many properties do you have now?

I have actually diverse portfolio, Mr. Cody. Like we have commercial, we have motels, we have fourplexes, duplex, duplex, single families, bunch of them. So we have a diverse portfolio of worth of multimillion dollars just created out of this credit card. Okay.

So for someone starting on this strategy with no to low money, so we're talking $5,000 to $10,000, they don't have a lot of money to go out and invest. If they're getting started on this credit card strategy, what would your one major piece of advice be to someone before they get started?

They can do in the beginning wholesale, like, you know, option to purchase real estate, to build up a little bit cash and build up the credit lines. And the first credit card for business is given to you with your personal guarantee based on your own credit score. And it will raise slowly. It's not a quick rich scheme. It's a quick— sorry, it's a slow-rich scheme. It's a delayed gratification. It's not instant gratification, it's delayed gratification. But if you choose to, let's say if you have $5,000, you can use that to put it under the land contract to buy the property, and you can use that as seller financing as well. So that money can be used in seller financing, that money can be used to put the option deposit, and do the sandwich lease options, and you can use that as you please. So if you have low credit lines, then you can use that for seller financing and the other couple of strategies we have, sandwich lease options. So you can lease it with the right to sublease, sandwich lease options. Though you can have 3 profit centers in that as a sandwich lease option, but if you have enough credit lines established, then you can of course use this one to purchase the property with your credit, with your cash.

That makes sense to me. So once you— I guess I have one more question. When you pay off the cards in full, what do you do with them? Are you not— do you keep the lines there? Do you extend the lines? Do you just get new cards or is that property done? You go ahead and lock up those cards in a box and you start a new LLC. What do you do at the end of your cycle once you've paid off the promotional period?

LLC can purchase next property. One LLC can own multiple properties. The same LLC. So I have multiple properties in one LLC. So you can get credit card again, credit lines again, and you don't have to— like I said, it's a very valid, viable option. You can cash out refinance at that level. Once the property is paid off, get the cash out refinance at the back end, and you have borrowed money, and borrowed money has no taxes. You know that.

But with the credit card goes to 18% or 20% after that 0% period, do you still use those or do you not use them at all?

So I keep them for like using it for like, you know, let's say we have to buy the, uh, pay a handyman, pay a contractor, or, uh, you know, buy the materials with different kind of windows or whatever. But we can go apply in other banks to get more 0% if you choose to.

There's so many banks And the higher interest rate just becomes a backup in case you really need it.

In case if you need it. Like I said, I use it sometimes temporarily for the time being. If you have a deal like that's no-brainer and you can pay it off in one year, you may pay the high interest rate temporarily if needed.

Yeah, makes sense to me.

Yep, I totally get that. And it's nice because it's like an emergency fund. If you, if you need to use them, they're still there and you have all that credit available to you if you have a project.

Yes, sir. That's very true. Perfect.

Well, that's it for episode number 1. Mohammed, it was great to have you here. And for everyone watching, we'll see you again next week.