Investment Strategy: Round 2 – Real Estate Crowdfunding
Building on the success of my first experiment, which generated $17,951 in net profit from $219,497 in balance transfers, I launched a second round targeting higher returns through real estate crowdfunding. This strategy focused on real estate crowdfunding platforms for short-term, high-yield investment opportunities.
I selected Groundfloor as my primary platform and iFunding as a secondary option. The target strategy aimed for a 16% annual return with a 3% borrowing cost, theoretically generating a 13% net profit margin.
Balance Transfer Portfolio: $352,711 Total
I executed a more sophisticated balance transfer strategy across 19 different credit cards, leveraging improved timing and promotional offers to reduce overall borrowing costs.
| Date | Card | Terms | Amount | Balance |
|---|---|---|---|---|
| 07/11/2016 | Discover More | 13m/0%/3% | $16,000 | $16,480 |
| 08/10/2016 | BankAmericard Cash Rewards | 15m/0%/3% | $19,400 | $19,982 |
| 08/10/2016 | BankAmericard Travel Rewards | 15m/0%/3% | $19,400 | $19,982 |
| 08/10/2016 | Citi Dividend Platinum Select | 10m/0%/3% | $18,000 | $18,540 |
| 08/10/2016 | Citi Diamond Preferred | 10m/0%/3% | $21,500 | $22,145 |
| 08/15/2016 | BankAmericard Platinum Plus | 18m/0%/0% | $19,961 | $19,961 |
| 08/19/2016 | Discover it | 12m/0%/3% | $20,800 | $21,424 |
| 08/30/2016 | Citi Double Cash | 17m/0%/5% | $21,000 | $22,050 |
| 09/17/2016 | Discover it | 12m/0%/3% | $7,000 | $7,210 |
| 09/21/2016 | NFL Extra Points | 15m/0%/3% | $14,500 | $14,935 |
| 09/21/2016 | Discover it | 12m/0%/3% | $14,800 | $15,244 |
| 09/21/2016 | Citi Simplicity | 21m/0%/3% | $24,200 | $24,926 |
| 09/22/2016 | MLB BankAmericard Cash Rewards | 12m/0%/3% | $19,700 | $20,291 |
| 09/23/2016 | BankAmericard Cash Rewards | 12m/0%/3% | $19,400 | $19,982 |
| 09/23/2016 | BankAmericard Platinum Plus | 12m/0%/3% | $19,400 | $19,982 |
| 09/23/2016 | Citi Double Cash | 10m/0%/3% | $24,200 | $24,926 |
| 10/05/2016 | Chase Slate | 15m/0%/2% | $14,250 | $14,535 |
| 10/05/2016 | Chase Freedom Unlimited | 14m/0%/5% | $15,000 | $15,750 |
| 10/13/2016 | Citi ThankYou Preferred | 16m/0%/3% | $24,200 | $24,926 |
| Portfolio Summary | 13.87 months, 0% APR, 2.99% average fee | $352,711 | $363,271 | |
Key Metrics: Total capital deployed: $352,711 across 19 credit cards. Total borrowing cost: $10,560 (2.99% average fee) for a 13.87-month interest-free period. This represents a 60% increase in capital deployment compared to Round 1.
Investment Performance: 7.22% Net ROI
The diversified strategy delivered solid returns despite significant cash drag challenges and platform limitations.
| Investment Component | Net Profit/Loss | Return Rate |
|---|---|---|
| EVIVA Midtown Project (iFunding) | $18,860 | 19.74% |
| DLI Fund Investment Returns | $17,164 | 8.45% |
| Balance Transfer Fees | ($10,560) | (2.99%) |
| Net Return on Investment | $25,464 | 7.22% |
Performance Summary: The real estate crowdfunding investment in the EVIVA Midtown Project generated an exceptional 19.74% return, while the DLI Fund contributed 8.45% over 10 months. After accounting for the $10,560 in balance transfer fees, the strategy achieved a net return of 7.22%, representing $25,464 in profit.
Cash Drag Impact: Significant opportunity costs occurred due to platform limitations. I experienced an $80,000 cash drag with Groundfloor for one month and a $250,000 cash drag with iFunding for two months, highlighting the importance of platform liquidity in investment timing.
Key Lessons Learned
Balance Transfer Strategy Mistakes
Several critical errors in timing and execution significantly impacted the overall returns:
- Premature Execution: Citi frequently offers 3% fee & 0% APR for 12-month deals. I should have waited several weeks for better promotional offers rather than accepting higher rates or shorter terms.
- Cash-Out Method Error: For credit cards requiring balance transfer to cash via over-payment, I should have used Citi’s 0% fee direct deposit option instead of transferring to U.S. Bank. This mistake required reversing all balance transfers and triggered massive account closures with Bank of America.
- Chase Timing Issue: Chase requires longer recovery periods before offering balance transfer deals after credit score restoration. I initiated transfers too aggressively.
- Poor Card Selection: Applying for Capital One, American Express, and U.S. Bank credit cards during the App-O-Rama phase was unnecessary as they are not balance transfer friendly. Due to the Chase 5/24 Rule, I cannot obtain new Chase cards until September 2018.
Investment Plan Adaptations
The strategy required multiple revisions due to platform and market conditions:
- Groundfloor Volume Issues: The platform experienced insufficient loan volume prior to 2017, limiting investment opportunities.
- Project Termination: iFunding terminated the ProudLiving Project, forcing capital reallocation.
- Strategy Pivot: 70% of balance transfer funds ultimately invested in the DLI Fund due to platform limitations.
- Early Termination: Due to strategic changes, I decided to pay off credit cards early and terminate Round #2, planning to begin Round #3 in early 2018.
Strategic Insights
- Reliable Banking Partners: Bank of America, Citi, and Chase remain the three most reliable banks for balance transfers. I can consistently access approximately $80,000 ($20,000 x 4) from Bank of America, $100,000 ($25,000 x 4) from Citi, and $60,000 ($15,000 x 4) from Chase.
- Cash Flow Management: Credit card minimum monthly payments totaled slightly over $4,000. Combined with household and living expenses, total monthly spending approached $10,000, which I managed through full-time employment income.
