SBLOC (Securities-Backed Line of Credit)
Brandon WeisBusiness Member
Property Manager · Lima, OH · Member since 2024 · 46 posts · 34 votesSBLOC (Securities-Backed Line of Credit)
3 Replies
- 1yJaycee GreenePro MemberReal Estate Consultant · St. Louis MSA · Member since 2024 · 3k+ posts · 728 votes
Quote from @Brandon Weis:
Does anyone have experience with SBLOC's and what institutions do you recommend working with? They are essentially borrowing against your brokerage accounts. This is a way to get liquidity from your investments without having to sell - just like a HELOC. I have heard of them but would like to hear from others with experience as they are not super popular due to them only being for wealthier individuals with the knowledge of them.
Hey @Brandon Weis As a former banker, I'm very familiar with what you call an SBLOC. In the industry, we referred to them as "margin lines" where you are leveraging the value of your securities portfolio to provide access to line of credit fundings.
While banks can differ in their "margins", but the banks I've worked with used a 50% LTV "margin". One of the things you need to consider when using an SBLOC if the value of one or more of the securities in your portfolio falls significantly, you get a "margin call" from the bank and you may have to paydown some of the balance of your line.
- Property Manager · Lima, OH · Member since 2024 · 46 posts · 34 votes1y
Quote from @Jaycee Greene:
Quote from @Brandon Weis:
Does anyone have experience with SBLOC's and what institutions do you recommend working with? They are essentially borrowing against your brokerage accounts. This is a way to get liquidity from your investments without having to sell - just like a HELOC. I have heard of them but would like to hear from others with experience as they are not super popular due to them only being for wealthier individuals with the knowledge of them.
Hey @Brandon Weis As a former banker, I'm very familiar with what you call an SBLOC. In the industry, we referred to them as "margin lines" where you are leveraging the value of your securities portfolio to provide access to line of credit fundings.
While banks can differ in their "margins", but the banks I've worked with used a 50% LTV "margin". One of the things you need to consider when using an SBLOC if the value of one or more of the securities in your portfolio falls significantly, you get a "margin call" from the bank and you may have to paydown some of the balance of your line.
Thanks for the response @Jaycee Greene! I want to clarify, when I say SBLOC, I do not mean borrowing on margin to buy more securities in a brokerage account. I'm talking about a line of credit against securities to go out an buy real estate. I find there is often confusion and people usually just assume normal brokerage account margin.
I understand the margin call aspect/risk of it. Where does one get these lines from? Does it have to be from the same institution as the brokerage account? Or can someone get them from another lender - whether a large national lender or online platform? The few bankers that we work with have given me blank stares when I've asked about this.
I'm asking about this for one of our owners who has his brokerage account at Vanguard, but I do not believe they offer the product we are looking for, so I am wondering if we need to transfer his brokerage account elsewhere or if we can get a line elsewhere for his account at Vanguard? I hope that makes sense.
- 1yJaycee GreenePro MemberReal Estate Consultant · St. Louis MSA · Member since 2024 · 3k+ posts · 728 votes
Quote from @Brandon Weis:
Quote from @Jaycee Greene:
Quote from @Brandon Weis:
Does anyone have experience with SBLOC's and what institutions do you recommend working with? They are essentially borrowing against your brokerage accounts. This is a way to get liquidity from your investments without having to sell - just like a HELOC. I have heard of them but would like to hear from others with experience as they are not super popular due to them only being for wealthier individuals with the knowledge of them.
Hey @Brandon Weis As a former banker, I'm very familiar with what you call an SBLOC. In the industry, we referred to them as "margin lines" where you are leveraging the value of your securities portfolio to provide access to line of credit fundings.
While banks can differ in their "margins", but the banks I've worked with used a 50% LTV "margin". One of the things you need to consider when using an SBLOC if the value of one or more of the securities in your portfolio falls significantly, you get a "margin call" from the bank and you may have to paydown some of the balance of your line.
Thanks for the response @Jaycee Greene! I want to clarify, when I say SBLOC, I do not mean borrowing on margin to buy more securities in a brokerage account. I'm talking about a line of credit against securities to go out an buy real estate. I find there is often confusion and people usually just assume normal brokerage account margin.
I understand the margin call aspect/risk of it. Where does one get these lines from? Does it have to be from the same institution as the brokerage account? Or can someone get them from another lender - whether a large national lender or online platform? The few bankers that we work with have given me blank stares when I've asked about this.
I'm asking about this for one of our owners who has his brokerage account at Vanguard, but I do not believe they offer the product we are looking for, so I am wondering if we need to transfer his brokerage account elsewhere or if we can get a line elsewhere for his account at Vanguard? I hope that makes sense.
@Brandon Weis The SBLOC does not require that you use the borrowings to buy more securities. You can use the borrowed funds to buy anything (that is legal), including real estate. But the issue is you're taking short term loans to buy long-term assets. If you're just using the funds from the SBLOC to acquire the property (and maybe do some light rehab) and then you convert it to a long-term loan when the property is stabilized (meaning you get a tenant in place), you're good.
As for where to obtain an SBLOC, and using your location in your profile, I would recommend contacting any large, regional bank that has a Private Banking or Wealth Management division. Examples of these (not a recommendation) are JP Morgan Chase, Fifth Third Bank, Huntington Bank, or Citizens National Bank.
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