Buying a house with multiple 0% credit cards - hypothetical

swindled

A friend of mine said they went to a 'Rich Dad' free seminar where they described how to buy a house with other people's money. Anyone seen one of these seminars?

Basically, the buyer takes out multiple 0% credit cards, cashes the money into their bank account, buys the house, then sells it just before the interest free period ends, repaying the loan and making a profit as house prices have risen in the mean time, pretty much how it was explained.

He didn't remember the figures too well, so estimating here, I'm guessing 20-30 cards, £3k-£5k credit per card, £100k at a charge of 2-3% for getting the cash in your account, so £103k outlay, 22 months interest free which is practically two years, so you can maybe get 110k -£115k realised value and 7-12k profit on sale?

Purely as a hypothetical scenario, is it possible to get that many cards all at once? Even with the same bank? Realistic fees charged for cashing out? Realistic profit figures at end of interest free period? Risks outweighing the benefits?

AppleMatt

I could only see 20-30 cards spread over several people, making the individual profit too small to be worth it.

Plus, imagine if you couldn't sell - instant £100k on crazy interest rates - ouch!

alanq

During a house price boom maybe that would work in theory but with prices not increasing much I doubt that any gains would cover stamp duty, legal fees etc. etc.

If one repeatedly bought and sold houses then it may be deemed that one is making a business of it and capital gains tax exemption may not apply.

The premise is that 20-30 companies will accept applications for cards seems unlikely to be true. As the number of cards goes up the chances of the next application being approved would go down.

redpete

He didn't remember the figures too well,

He can't really be serious about this then.

so estimating here, I'm guessing 20-30 cards, £3k-£5k credit per card, £100k at a charge of 2-3% for getting the cash in your account, so £103k outlay, 22 months interest free which is practically two years, so you can maybe get 110k -£115k realised value and 7-12k profit on sale?

Easy to make up figures that would make it work. Difficult to make up realistic figures that make it work with acceptable risk.

Purely as a hypothetical scenario, is it possible to get that many cards all at once?

Very unlikely. Multiple applications for credit over a short period are not seen as a Good Thing when a lender checks credit records. Note also that only a small proportion of cards allow transfers into cash accounts.

Even with the same bank?

Even less likely (impossible unless the bank has absolutely useless IT systems and records).

Realistic fees charged for cashing out?

3-4% for transferring cash into an account.

Realistic profit figures at end of interest free period?

Can you predict house prices accurately enough to know how much a particular house will increase over a short period? If so then you won't need such complex schemes because you will be able to make lots of money with normal loans

Risks outweighing the benefits?

Of course, even if the basic premise was possible the risk of the house not selling or not making enough would leave you paying interest rates of maybe 20%. How long do you think you could keep this up?

Glad your friend didn't pay for the seminar if this was typical of the advice given.

david39

I doubt that there are 20-30 card providers in the UK.

Most of the cards these days, although branded under different names, are administered by a handful of issuers. MBNA for example handle the Virgin card as well as many other brands.

If you apply for a large limit on Virgin, MBNA will not repeat a similar limit on their own brand or any of the other cards they control. This applies to all of the other card issuers, too.

My opinion is that, if you made multiple applications, you might get one large limit and the rest would be nominal amounts.

zerog

swindled wrote: »

A friend of mine said they went to a 'Rich Dad' free seminar where they described how to buy a house with other people's money. Anyone seen one of these seminars?

A mortgage is where you buy a house with other people's money.

Basically, the buyer takes out multiple 0% credit cards, cashes the money into their bank account, buys the house, then sells it just before the interest free period ends, repaying the loan and making a profit as house prices have risen in the mean time, pretty much how it was explained.

If the house price rises by less than say 6% a year, you would have been better off spending your time getting a job or learning how to invest in forex/shares etc. If the house price rises by more than 6% a year, then with current rates you might as well get a BTL mortgage, and increase that 6% to 10% with rent.

mynameistallulah

swindled wrote: »

making a profit as house prices have risen in the mean time, pretty much how it was explained.

Ah yes, because house prices always rise ... Don't they?

thenudeone

Of course they do.

Except when they don't.