How To Borrow Against Stocks To Buy Real Estate
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- Опубликовано: 6 дек 2021
- This week Dan Blackwell explains how you can use a pledged asset line of credit to borrow against your stock portfolio to invest into real estate.
Dan Blackwell & Team has specialized in Multifamily Investment Sales since 2008 and currently leads the Orange County Multifamily Investment Sales division for CBRE. Dan’s focus is to help investors make the most prudent business decisions with their investments.
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DISCLAIMER: Dan Blackwell, including but not limited to any guests in his videos, are not financial advisors, or brokers. They are solely sharing their personal experience and opinions; therefore, all strategies, tips, and recommendations shared are solely for entertainment purposes. For investment advice please seek the counsel of a financial/investment advisor(s); and conduct your own due diligence.
Exactly what I needed to find. Thank you, going to be doing this to get my first home in a few years.
Life goals right here....
thanks for the info
What the difference between this and SBLOC ?
So I have a few questions?
1. How much interest would you pay towards these loans?
2. Do you have to pay the loans back monthly?
3. Does your money continue to grow in the stock as you've never taken it out? In other words, would the 3 million continue to grow compound interest? Still have to be careful with this one because of the volatility of the stock market!
4. How much can you borrow?
5. Do you have to pay the loans back?
Just curious as to how it works! Thanks!
1. Depends on Brokerage
2. No but interest accrues
3 . Money continues to grow
4. Depends on how much Equity you have in your stocks
5. Yeah you have to pay back the loan.
Most of these depends on the contract and both parties agree too you still own the asset and if the asset pays dividends you still gain the dividends are still yours yes you have to pay the loan back or you default and forfit your collateral if you default because the collateral droped its price they can still come after you for the difference
Usually you can borrow arround 50% and 70% of the value in your account.
How do you pay it off? I still don't understand that. Even after the refi
If you have a decent income; rather than get a normal real estate loan, you could get the type of loan he is talking about, and then pay this loan off over time. A smarter idea than using such a pain to buy a second home; would be to buy an investment property as, the rent and any additional money you contribute could go towards paying the loan off. The more of your own I come you add to paying the loan off; the quicker it will be paid off. Once the loan is paid off; you can now use your stocks and the home as collateral to buy a second rental property, now the rent from the first property, this new second property, and any additional amount you add from your own income can pay this property off quicker than the first home, if the amount you paid for the new property is similar to that of the 1st property. Eventually, you can end up owning enough properties that; you no longer have to use your stocks as collateral, contribute any of your own money, because the rent money from your properties will be enough to pay off a new property rather quickly. Once you have done this enough; which is about 4 or 5 properties; it becomes a more automated process, and you can keep acquiring more properties. When you acquire enough properties that maintaining them takes too much of your free time, you can hire a management company to take care of such things. Also, you can sell or trade up a few of your properties; to buy a single property that is bigger than your individual properties. For example, you could sell 2 or more properties so you can buy a duplex, triplex, etc. If you can't afford to make monthly payments on a loan; you shouldn't be buying an asset by using stocks or other assets as collateral. A big mistake people often make once their personal home is paid off; is selling this home to buy a bigger personal home. You are better off many times; by renting out this home, using the rent income and the house as collateral to get the loan for the second home. If you are single; you may be better off renting a cheap place rather than buying a bigger second home, and instead use the loan to buy a second rental property, and following the steps I wrote previously. Once you have enough properties; the rental income will be enough to buy the bigger home you want. You could even buy a duplex at some point; so you live in half and a tenant lives in the other half, their rent will help you pay off the property, especially if you contribute some of your own money.
@@ernestmac13 Everything you wrote makes complete sense. Most of the people just don’t have time to read a long but good stuff, they’re just used to the swipes and shorts and tiktoks.
Help me buy or build multifamily. I am not rich but I can listen
Wonder how that pledged asset worked out considering the S&P fell $120 over the last 8 months
Im pretty sure thats irrelevant unless you defalt on your loan you still have the contract but if the price of your collateral price drops and you defalt the lender can still come after you for the diffrence
Just don't borrow more than 50% of your assets, and you've accounted for that.
typical the loan will be on 20-50% of portfolio value (for stocks)
I do this all the time but I don’t buy real estate yet, just with emergencies that have come up. I do a margin loan and then when I get paid, I pay it back. I assume if you’re making a profit on the rental each and every month instead of paying yourself, you would defer that income to the loan until you had paid it off. You would still own the property & the stock, at the end. Even if the market tanks TDA doesn’t let you borrow more than 50% of the account balance so the market would have to tank 50% or more for a margin call so there’s still value there, if you have to sell. Of course, that may trigger capital gains depending on how long you’ve held the position but still.
Hi Jocelyn, I’m concerned that you may be too invested if you are needing to borrow against your stock to handle emergencies. Just my thoughts. Safer to have about 3-4 months expenses in cash plus a credit card that can be used for day to day expense but paid off every month in full.
Hi, I get the whole cash is king mantra but it makes no sense to me when inflation is as high as it is & increasing every year. Why have dead money if you can read technical charts & understand market trends? I'm not 100% right but my batting average is pretty high & my market experience allows me to feel comfortable with how I'm doing it BUT thanks for the advice. It's always good to compare your judgments, tweak if necessary & ensure you're on the right course for yourself.@@theshadowsymphony
I'm not sure this video aged well. Today (May 2023), the rate on that loan would likely be in the 5-6% range. I believe these loans are floating rate tied to LIBOR or SOFR. Does it still make sense when rates are at these levels?
Wouldn't it be a plus that they still get to keep their money to make more money?
You could renovate a property without being crippled by capital gains this way
Still better than selling stocks at short or long term capital gains.. depending where you live
Yeah this was bad. What they should have done is an SPX box trade with a 5 year term for 40% of it and used a normal 30 year mortgage for the rest.
The rates vary by broker as I understand it. So if you’re thinking you might use this strategy you should probably shop around for the best rates. But if you can make 10 or 12 percent return on a new asset, then it still makes sense to me.
Say I borrowed 50% against my stock portfolio on Jan 1 2024. Say my stock portfolio decreases in value by 40% June 30, 2024… what affect, if any does it have on my loan?
Also, say my interest rate is 5% and I buy a piece of land that produces no income.. can I pay the interest back from gains in my stock portfolio?
you will get margin called
if it's marked to market, you'll get margin call. But I'm not sure how it works.
👀🤔
Then why do this video, AND bore us kmt
Don't do this. EVER. Since this video came out, the market has fallen over 20% which means you would have gotten a margin call. You would be super screwed if you followed his advice.
you can borrow only 50% of what was in stock. when will margin call trigger?
False. I have 300k in margin atm, depending on your brokerage, you only need to maintain 25% of your borrowed amount
Yep. Unless you have plenty of other funds and/or assets to cover your ass then no worries right? 😃