Use Brokerage Account for Down Payment

2 Replies

Hello! First post on biggerpockets.com!

I invest in a brokerage account, but would also like to buy rental property. I put every ounce of cash I have available into the brokerage account, because I have a risk allocation that is relatively risk free, and generates close to 10% in interest per year.

I want to invest in a rental home. However, I would really like it if a lender could use my brokerage account as my "skin-in-the-game", vs putting 10-30% down on the deal in cash. By doing this, I figure I can significantly increase my ROI.

Most banks/brokerages I’ve spoken to want me to put the funds in a pledged asset account. This would allow me to take out cash against the brokerage account, but at the steep cost of approx. 5.5%. Then they want the cash put towards the mortgage.

I would like to find a lender that would secure the brokerage account, but not require this pledged asset conversion—I’m fine with pledging assets, I just don’t want it to cost money. Does anyone know of any Brokerage/Bank combinations that would allow for this?

Thanks so much guys, and have a great day!

Heidikin

@Heidi Foster what you are describing has close similarities to SOME bank policies on their accounts.  For example, Chase Bank will allow you to borrow against your investment account.  So you can keep your investments working, and have a loan against the value (usually 50% of the value), that you could use for a down payment requirement.  Chase allows this once you have $250,000 or more in their proprietary funds...so all of your funds that you could lend against would have to be with Chase.  I believe that most of the large retail banks have a program like this as long as you meet their threshold value requirements.  There are some pretty interesting terms to these types of loans....as in, if your fund would decrease in value, you would owe the difference of 50% immediately, so if you are in this type of scenario then do ask about all the terms and conditions for this type of a loan product with your bank.  Good luck!

@Heidi Foster beware betting long with short term money! If you real estate asset fails it'll take down your investment account with it.  Same thing if you "borrow" against your stocks and they lose value and/or rates continue to go up.  Don't give up though! Keep working that creative brain of yours! :)