All Forum Posts by: Denver McClure

You could go with a Margin Loan to pay off your credit cards as well. This only applies to you if you have an individual or joint taxable brokerage account. Right now rates are close to 4.5% to borrow against your portfolio. There's no underwriting or credit checks, and you can chose to only pay back interest only on the loan until you are financially stable enough to payoff the principal balance. It's a strategy I've used myself for rehabs and down payments. 

Hey Trista, I'm a big fan of the Margin Line of Credit. If you are a RE investor, you're most likely comfortable using leverage to get a good deal. Investing in a portfolio of securities helps you diversify against your RE portfolio, plus adds liquidity via the Margin Line to use for any down payments or renovations. You also don't have to go through a lengthy underwriting process like you would for personal loans or HELOCs that require credit checks, income verification, etc. This is a common strategy I've personally used and one that I build for my clients.

If you do go with the Margin Line strategy, make sure you do your research on brokerages that provide that. 7% is a little high compared to other providers. Interactive Brokers is currently at 3.91% to 4.58% on their Margin Lines, M1 Finance is sitting between 5% to 6.5%.

Hey @Dimetrius Anderson, I would absolutely recommend @Harrison Sharp as your go to Agent in this market. You'll want people on your team that have personally invested in real estate and have the experience to back it up. Harrison has that knowledge and can give you the support you need. 

Hey @Trista Yerkich, you shouldn't have any issue getting a securities backed LOC (Margin Loan), as the brokerage will usually only take into consideration your portfolio size and holdings. They may lend up to a different % per holding based on that assets risk. As an example, they may lend up to 25% on a single stock like Tesla, or up to 50% on an indexed ETF like VTI. A large benefit of the Margin Loan is that it doesn't require any credit check or underwriting process similar to HELOCs. I would consider Interactive Brokers (3.83-4.83%) or M1 Borrow (5.0-6.5%) as the top brokerages that offer low cost Margin Loans. Using a Margin Loan against your taxable portfolio for real estate is a common strategy we use for our clients, and one I've personally used myself. 

Hey @Season Price, I would agree with Scott's 4th option, as a margin loan will be far cheaper than hard money or private lenders. I would suggest checking out a few different brokerages to find the most competitive rates and transfer any individual or joint taxable accounts over to that brokerage. This is a common strategy I use for my real estate clients and myself! Rates are between 2.83%-3.83% right now at Interactive Brokers. 

Hey @Wences Lopez this depends on your partners risk tolerance and goals. Does he only want to invest into real estate? If so private lending, syndications, and REITs could all be a great option. They could consider a Margin Account to invest the 250K in, then lend out cash via a Margin line of credit to real estate investors. The plus side of this is your 250K could be invested in REITs, ETFs, stocks, bonds, etc, which will grow the portfolio's size and produce income. I would recommend Interactive Brokers if they want to use a Margin line of credit. You can borrow against your portfolio at 3.83% right now, and tap up to 50% of the value in cash. So a 250K portfolio will provide you with a 125K line of credit. This is a common strategy I build for my clients who invest in real estate. 

This depends on your age. I wouldn't hold dividend and income funds in a Roth IRA unless you are close to 59. A Roth should usually focus on growth stocks and low cost index funds (VTI, VOO, etc...) if you are investing for the long term. Your time horizon, age, goals, account type, and risk tolerance all determine your allocations. Keep maxing out the Roth regardless, but don't aim for income producers unless you are at 59+.

As for a taxable acct to use margin on, I like Interactive Brokers (What I use for my clients and myself) and M1 Finance. Since you are avoiding DRIP and taking in the cash, an account size of less that $100K won't really provide much monthly passive income. Yes, you can tweak the funds and go into extremely high dividend producers, but you usually will sacrifice capital appreciation if you do so. Once again this depends on your age and use of funds. I have clients that use their margin accounts for passive income in early retirement, and I have many that use their margin account for lines of credit to buy properties. For example, you could get a $50K margin line of credit on a $100K portfolio, and use that for a down payment or renovations. 

 @Jesse Carmack, without DRIP, you'll want a broad exposure to multiple income producers in a taxable account. JEPI, QYLD, RYLD, SCHP, IGLB, BKHY, SCHD, VYM, VNQ and MLPs are great options. Just make sure you are investing in a Margin Taxable portfolio so you can leverage your funds to acquire hard assets like real estate.

Hi @Helen Fradette, Your savings rate will depend on your NET income, expenses, goals, and investment horizon. There is no such number that is perfect for everyone such as "live off 50% of your income" or "invest 20% in your retirement accounts" etc. Focus first on your Net Income minus expenses, and determine what % of your income goes out the door every month. If it's 40%, can you make it 35%? Starting here will help you budget and track your finances better to optimize your savings/investment rate.

Next, consider what your goals and investment horizon are. Do you want to retire early in 10 years, buy a rental property within 6 months, start a business in the next 5 years, save for a child's education expenses? Once you lock in your goals and timeline, you can determine where to stash the remaining % of your income that does not go to expenses. You'll want a healthy emergency fund in cash (I usually recommend 3-6 months of expenses) before you begin investing. Then lock in how much % of your remaining income will max out your Roth IRA, HSA, or employer sponsored retirement plan. Any employer match or pre-tax contribution % should be added in to determine your total allocation to retirement funds. Your goal % to allocate to retirement funds can be calculated using financial planning software, or by determining what your future expenses may be after you retire and are able to withdraw funds from these accounts.

For the remainder of your income not used in expenses, emergency fund, or retirement accounts, you'll want to invest within an individual or joint (if married) taxable account. Consider this as an early retirement/opportunity account to invest your cash in while waiting for your retirement accounts to allow penalty free withdrawals. These accounts can allow you to invest and grow your net wealth in the short term. I have clients that use taxable accounts to primarily acquire rental properties or complete flips so they won't need to hold onto so much cash (which is getting crushed by inflation). This account could be a great landing spot for any excess cash to grow in the meantime while you ponder your future goals. Investments can be sold (taxable event) and flipped to a retirement account or college fund to help jump start more tax efficient savings. You may even have access to a Margin Loan (speak to your brokerage or Investment Advisor first) which will allow you to borrow against your portfolio at low interest rates to obtain cash (without selling your investments) for a home remodel, rental property down payment, paying of high interest debt, etc. 

Hey @Chinny Anajemba, I would absolutely recommend that you talk to @Tyler Hodgson at NXT Mortgage. He has plenty of experience in real estate investing and has done a great job on each of my loans!