Anyone Used a Securities-Backed Loan + Cash-Out Refi Strategy to Buy Rentals?

[Ian Henderson]

Hey BP community,

I’m exploring a creative financing strategy and was wondering if anyone here has firsthand experience with this approach — or any insights on potential pitfalls or advantages.

Here’s the general idea:

1. Use a securities-backed line of credit (SBLOC) against my investment portfolio to purchase a rental property.
2. Once the property is stabilized (rented and possibly improved), do a cash-out refinance to pay back the SBLOC and effectively recoup my initial investment.

In theory, this seems like a way to:

• Move quickly on deals (cash offers are attractive)
• Avoid triggering a taxable event by selling securities
• Retain the upside of the invested portfolio while acquiring real estate

But I’m curious:

• Has anyone on here actually used a securities-backed line of credit (SBLOC or similar) to purchase a rental property?
• How did it go when you refinanced — any surprises from lenders?
• Were there any issues with timing or risk (e.g., if the market drops and the margin call risk goes up)?
• Any lenders or banks you recommend that are investor-friendly when it comes to this kind of setup?

Appreciate any feedback or experiences, I want to be thoughtful and strategic before pulling the trigger.

Looking forward to hearing from others who’ve tried this — thanks in advance!

[Patrick Roberts]

It's a great tactic. Pricing is usually similar to or below hard money. It's not super common because not everyone has the portfolio to afford this and not all brokerages allow cash loans. I know Interactive Brokers used to have a great product for this. 

The biggest risk is a margin call. As long as youre keeping your leverage low enough and not using highly volatile/high beta positions, you should be fine. Your advisor should be able to provide a lot of guidance here. 

As far as the refi goes, there shouldnt be any issues. Depending on the seasoning on title, your lender may or may not source the downpayment using the purchase settlement statement and a transaction history from the securities account. Im not aware of any lender who disallows this source for a downpayment.