Margin loan to finance real estate

Discussion in 'Retail Brokers' started by andrew black, May 11, 2019.

  1. Times


    Margin loan is only for stocks tho?

    Or are you looking at something like this E-Trade Line of credit where you can borrow up to 50% of your portfolio

    I would be curious on the link to the details on this "margin loan"
    #11     May 12, 2019
  2. Rather than guess, play out scenarios and what you would do. Assume you have taken a loan against your securities, paid off your house and lied to the bank about your margin loan and thus opened up a HELOC (I don't think they'd let you open up a HELOC with the loan on the books).

    Scenario 1:

    Markets crash: borrow from HELOC and put into trading account to avoid margin call. Transfer back afterwards.

    Scenario 2:



    Once you've gone through this exercise, then I think you'll know better what you should do.
    #12     May 12, 2019
  3. #13     May 12, 2019
  4. Times


    oh I would have preferred something more official in regards to IB stating its ability to use margin loan for Real Estate.

    However, assuming this is the best opportunity cost, I would go with the lowest interest rate loan you can get to maximize returns/savings on the RE deal.

    Would be curious on updates if you do the deal. Best of luck
    #14     May 12, 2019
    andrew black likes this.
  5. newwurldmn


    You might qualify for a mortgage without income. I got my mortgage based on assets. The thing is that the bank had to hold my mortgage on their books (they can’t sell it via an asset backed security).

    What will it cost you to hedge your account to avoid a margin call at all costs? That would represent a real risk of ruin for you.

    While I do something like this, all my assets earn on their own. So if an engine on my financial 747 shuts down I can still manage my financial leverage with the other three.

    If you can’t do that this could represent a real risk of ruin. Another guy on her essentially levered his his deferred tax liability and now he’s essentially lost a decade of wealth creation as a result of 3 months of unfortunate trading.
    #15     May 12, 2019
    nooby_mcnoob likes this.
  6. Sprout


    It would make more sense with an income producing property.

    Depending on your acquisition skills, that could be enough of a down and have the seller carry on a larger property or purchase outright on a smaller one. You can then claim the income.

    If you are thinking an owner occupied SFR to capture appreciation in a hot market, houses in that tier are the first ones to cool down when the market goes soft.

    In either case you’ll want to do a Heloc afterwards to put the liability where it belongs and not have different asset classes cross collateralized. You can do this on SFR and multiplexes, but once you go above 4 units you’re in commercial loan products.

    I haven’t flipped deals in awhile so the landscape might have changed. If I were to get into it again it would be in flipping paper to rehabbers on SFR’s, as a hard money lender or commercial storage. Raw land dev is the most profitable but requires the most skill to bring to fruition without an early exit.

    RE requires a lot of hustle and it’s certainly harder to buy and sell than with a simple mouse click. Of course this is combined with the knowledge and skill of when to do the mouse clicking.
    #16     May 12, 2019
  7. Jeronimo


    I can't really offer much advice here, as already suggested markets are not currently 'cheap'. But one thing is for sure, when I read threads like this it makes me nervous about putting more of my own money into the market right now like a simple loan source. Back in early 2009 when we were going all in, I couldn't find anyone willing to talk about buying shares...especially taking on debt to do it. How things change.
    #17     Jun 19, 2019