Collateralize Stock Investments to Fund Real Estate Purchases

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Collateralize Stock Investments to Fund Real Estate Purchases

David G Vreeland
Accountant · Member since 2020 · 26 posts · 2 votes

I'm curious if anyone has used their stock portfolio as collateral for hard money loans or leveraged their stocks in some other way to fund property purchases.  I am also familiar with using 401k to fund business financing (ROBS) so am curious as well if anyone has utilized that as well.

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Daniel McNulty
Financial Advisor · Indianapolis, IN · Member since 2018 · 294 posts · 165 votes
5y

@David G Vreeland

You are looking for a security backed line of credit, SBLOC.

The terms are normally excellent. Interest only, good rates. Just be sure not to pull too much and risk a call. Try to stay south of 50% LTV and you should be fine.

They work great, very flexible, quick and easy to use for RE purchases.

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    5y

    A margin account loan against your stocks with your brokerage?  Way cheaper than a hard money loan.

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  • David G Vreeland
    OP
    Accountant · Member since 2020 · 26 posts · 2 votes
    5y


    Originally posted by @Wayne Brooks:

    A margin account loan against your stocks with your brokerage?  Way cheaper than a hard money loan.

     Hey Wayne, Thanks for your reply.  Do you have any experience with doing that?  I'm a little bit familiar with Margin Loans but last time I looked into them there were some pretty severe restrictions on the type of assets that could be collateralized.  In some cases they could also only be used to purchase additional stocks and not be taken out of the account.

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  • Daniel McNulty
    Financial Advisor · Indianapolis, IN · Member since 2018 · 294 posts · 165 votes
    5y

    @David G Vreeland

    You are looking for a security backed line of credit, SBLOC.

    The terms are normally excellent. Interest only, good rates. Just be sure not to pull too much and risk a call. Try to stay south of 50% LTV and you should be fine.

    They work great, very flexible, quick and easy to use for RE purchases.

    1Reply
  • David G Vreeland
    OP
    Accountant · Member since 2020 · 26 posts · 2 votes
    5y
    Originally posted by @Daniel McNulty:

    @David G Vreeland

    You are looking for a security backed line of credit, SBLOC.

    The terms are normally excellent. Interest only, good rates. Just be sure not to pull too much and risk a call. Try to stay south of 50% LTV and you should be fine.

    They work great, very flexible, quick and easy to use for RE purchases.

     Perfect thank you I'll look into it. If you have any suggestions of SBLOC providers you've  found to have the lowest rates/fees please post them.  Thanks again.

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  • Sean T.
    Rental Property Investor · MA · Member since 2014 · 420 posts · 213 votes
    5y

    @David G Vreeland I closed a property today, seriously 8-9hrs ago, and often fund via my portfolio.  Just a straight up margin loan.  Easy as pie. 

    Now, should most people do this.  No.  Absolutely not.  There are innumerable issues that can be at play that exceed far beyond rate and terms.  Market risk, currency risk, inflation rick, etc.  If you can't think of 5 more risk factors, you shouldn't use a margin loan.

    I have answered this question several times in the past week or two and it is telling me folks are looking for a magic bullet(not saying you are) and this is scary. 

    My fear, again not you David, is that a bunch of folks who are brand new to real estate are going to leverage the heck out of high risk portfolios and inadvertently ruin their lives.  

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  • David G Vreeland
    OP
    Accountant · Member since 2020 · 26 posts · 2 votes
    5y
    Originally posted by @Sean T.:

    @David G Vreeland I closed a property today, seriously 8-9hrs ago, and often fund via my portfolio.  Just a straight up margin loan.  Easy as pie. 

    Now, should most people do this.  No.  Absolutely not.  There are innumerable issues that can be at play that exceed far beyond rate and terms.  Market risk, currency risk, inflation rick, etc.  If you can't think of 5 more risk factors, you shouldn't use a margin loan.

    I have answered this question several times in the past week or two and it is telling me folks are looking for a magic bullet(not saying you are) and this is scary. 

    My fear, again not you David, is that a bunch of folks who are brand new to real estate are going to leverage the heck out of high risk portfolios and inadvertently ruin their lives.  


    Hey Sean, you are right to recommend caution, I do not plan to use margin until I:

    1.  Understand the risks and dynamics.

    2.  run it into my numbers under worst case scenario.

    3.  Am only leveraging funds I'm okay with losing.

    1Reply
  • Abraham Kaplan
    Investor · Member since 2018 · 86 posts · 22 votes
    5y

    Is it possible to use an IRA to get an SBLOC?

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  • Daniel McNulty
    Financial Advisor · Indianapolis, IN · Member since 2018 · 294 posts · 165 votes
    5y

    @Abraham Kaplan

    No you can’t take a SBLOC against IRAs. You can often get a 401k loan if that is available to you through your employer.

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