First of all, I am in no way an expert at this, so please call me out if this sounds ridiculous! I'm looking for info on the wisdom (or stupidity!) of borrowing against a brokerage account for RE investments. Basically, my brokerage firm allows a customer to borrow against their current assets for a variety of uses, including real estate purchases.
My thoughts were that it could be very useful for making cash offers. Once approved by my brokerage firm, the funds are easily accessible, therefore a cash offer could be made on certain properties. After the purchase, I'm thinking a transition could be made to a traditional 80/20 LTV Mortgage then rinse/repeat for the next property.
Now, I can see the negative aspects of this in that a bad RE deal could really hurt my current investments. I am sure there may be some other negative aspects that I am overlooking as well...that's why I'm reaching out to YOU BP community!
@Derrick R. I did it several years ago... used the brokerage account as security against a three-month bridge loan. Didn't present any problems, but I imagine whether or not it does depends entirely on the portfolio, the market, and the terms of the loan.
The issue with "borrowing against the box" is the call feature if the portfolio value drops, so long as you allow for a sufficient market fluctuation you should be fine. It's a good money management technique, so long as you use those funds at a loan to value that allows the property to be rather liquid, as you know, RE is not liquid. If there is any hit to be taken it should be from those funds unrelated to your pledged assets. Good luck :)
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