Fund Commercial or personal real estate using a securities-backed institutional loan

Challenge: Use a Securities-based Line of Credit for Real Estate Investing

A Possible Securities Loan Solution

Finance your real estate downpayment or entire project with interest-only repayment while still retaining your stock or securities portfolio.

John Shareholder wants to buy a new house. He needs cash for a downpayment, but believes some good prospects are ahead for the company soon and doesn't want to liquidate his favorite stock position - now worth $150,000. The house costs $500,000 and he needs $100,000 for the downpayment.

One solution: With a stock-secured loan or custom securities-based line of credit, he may be able to receive up to 95% of the value of for selected securities and if the collateral shares are marginable, it might be tailored with options so as to be a limited recourse basis.

As a line of credit, he's be able to repay the principal at his own liesure, and keep the line open by simply making the low-interest, interest-only payments that some programs make available. This would allow him to keep his shares unsold, in his own title and account managed by licensed advisors at a major institution, while using the proceeds for his real estate.

Behind the Numbers:

Either way, he keeps the capital he needed for financing his home purchase, while, his securities keep working for him in the marketplace. This same model can be applied to large commercial transactions too, since underwriting and managing is through one of three top-tier U.S.-based SIPC-member U.S. brokerage firms with our recommended institutional program.

Example:

He owns 15,000 shares of stock currently priced at $10 a share and puts them up for an institutional securities line of credit.

With his portfolio worth $150,000, @ 85% this yields $127,500 in cash to put towards his downpayment, with $27,500 left over for furniture or other expenses. (Note: Some loan points/fees might come out of the proceeds, depending on the program).

Note that John's loan can be structured into an interest-only or interest+principal format for client convenience, fixed or floating. Other flexible features might apply. .
Shares remain in your own account and title, with a conventional lien-style structure as the lender's security.

If you'd like to locate an appropriate lender for your securities-based financing, use a major search engine to begin your search.