House Hacking: How to Leverage Your Credit Card

Today we're going to talk about a little hack within the house hack - using your credit card to your advantage.

I don't remember when I first started doing this or if I heard it from somewhere - but I love using my cashback card for fixed expenses on our house hacks.

These expenses are ones we would be paying for regardless - or chose to include with our properties, such as internet. This is the real reason I started doing this in the first place - why not just throw it on a cashback card and get a little kickback from it - but i found there are many other benefits to doing this, rather than just paying with checking or cash.

So on top of the little kickbacks, it allows us to easily track spending on each property.

You get a monthly and yearly statement which is huge during tax season. 

The statements show exactly what was spent, when it was spent, and what it was spent on - and usually is broken down into categories. Whether you do your taxes yourself or hire someone to do it for you - it's just a very efficient way to see all of your spending - in each category.

With that, we can make pretty accurate estimations - of what future expenses might look like for the next property we move to - especially if it's similar to the current property we are in - and also gives a clear picture of what expenses will look like for each property in the future.

It helps tremendously when budgeting for your current property - when the time comes to rent it out - and also when you're running numbers and estimating expenses on your next property 

Now here's a little perk I found with the cashback

We just kind of let the rewards accumulate over time - and don't really touch it. Well, as the cashback adds up on your card - this can also be a considered to be small reserve account - for minor repairs and maintenance.

Little cherry on top

Now, obviously you're not going to rack up enough points to repair a roof or furnace - unless you just never touch the cashback for years and years - But, they can still be incredibly useful for smaller repairs and general maintenance - if you don't want to dip into your reserves account 

Credit score!

As you use this card for these small fixed expenses - you're very likely going to be under that 1-2% credit usage rate - that creditors say is the best way to build your credit.

As you know, when it comes to purchasing real estate in general - your credit score is super important

So by using your card every month for small purchases - will really build up that score over time - and keep you in good standing once it comes to purchasing your next property. 

Or just in general - regardless of a real estate purchase or not - it's keeping your score higher

So what cards to get

So I personally use a Discover high cashback card - but there are tons of credit cards out there with similar benefits. 

When you're selecting a credit card for this stuff - consider the fixed costs you plan to include in your house hacking strategy.

My fixed costs each month on each property - are internet, a coffee subscription, and HOA fees.

So they're kind of scattered when you break it down into those "categories" - which is why I just took a general high cashback card - like 3% cashback or something like that.

But if you decide to include utilities, cable, internet - or a a handful of fixed costs in the same category -  look for a card that offers high cash-back in that specific categories.

Some cards offer up to 6% for just a specific category.

So just because I use a Discover card - doesn't mean you have to go and get the exact same one - you'll likely get better cashback if you find cards that focus on one category - that you've decided to include in your rent - than what I've got

Last few things to note and I'd recommend - don't just go and get 3 or 4 cards that have specific category benefits and start putting those costs on different cards.

It could hurt your credit doing this - but wouldn't hurt to reach out to your lender - and see what they recommend. The last thing we want to have happen - is hurting your credit to the point where you're not able to qualify for your next house hack - just because we wanted to get some credit card cashback lol

Also - it just makes things that much more difficult to track. 

Remember - we want to make house hacking as efficient - and less time-consuming as possible. 

I've found it is so simple to just put it all on one card - and set up auto-pay for the full statement each month. Never even have to look at your card or account.

Lastly - look at the card terms. Some of these cards have spending minimums - and also have annual fees. You may not reach those minimums with multiple cards - and the annual fee might just eat up all of your cashback. Unless you're spending racks on these cards for your fixed costs - avoid cards with annual fees.