BiggerPockets Money20 Jan 2023

376: Margin Loans: Low-Interest Lending or Risky Rates?

Margin loans could be the sneakiest way to snag a low-interest rate loan in today’s Fed-influenced environment. What most investors don’t know is that you can use your stock portfolio as collateral to get massively discounted lending, but it comes with considerable risk. Carl and Mindy Jensen used this type of lending to buy their most recent real estate purchase, a medium-term rental renovation project in the same neighborhood as their primary residence.

At the time, Carl could get an interest rate so attractive that it was almost impossible to pass up. We’re talking about mortgage-sized loans with less than 2% interest! This seemed like a steal at the time, but as the market started to tank and big tech stocks like Tesla took a tumble, Carl and Mindy’s margin loan began getting hit. They faced a tough decision: either get liquidated and lose much of their stock portfolio or come up with the difference themselves.

In this episode, you’ll hear exactly how Carl and Mindy grew their stock portfolio to multiple millions in worth, the mistakes they made along the way, why they took out a margin loan, and whether or not they’d do it again. If you’ve got a sizable stock portfolio but don’t know how to get funding for your real estate deal, stick around! Margin loans could be an option for you, but you’ll need to know how to work them first.

In This Episode We Cover

Margin loans explained and the risk that comes with a low-interest rate loan

Investing in tech stocks and whether or not they’re worth it now that stock valuations are down

Index fund investing and why single stock-picking may be riskier than you think

What getting a “margin call” means, and what to do when your stock values drop

HELOCs (home equity lines of credit) and using them as a safety net for paying off debt

Carl and Mindy’s new medium-term rental and whether the headache was worth the new house

And So Much More!

Links from the Show

Find an Investor-Friendly Real Estate Agent

BiggerPockets Money Facebook Group

BiggerPockets Forums

Finance Review Guest Onboarding

Mindy's Twitter

Mile High FI Podcast

1,500 Days to Freedom

Carl's Email

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Listen to The “On The Market” Podcast: Spotify, Apple Podcasts, BiggerPockets

Check Out Mindy’s 2022 Live Spending Tracker and Budget

Finance Friday: My Home Renovation Put Me in a HELOC Hole

Click here to check the full show notes: https://www.biggerpockets.com/blog/money-376

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