Using margin loan for investment
Question: In relationship to my other recent note (thread titled “Investment mortgage advice needed, NJ”), I’m now looking at alternatives. One, in particular, is to take out a margin loan against my existing securities. I can currently withdraw about $150K, of which about $40K is cash the rest margin loan. I figure that if I put the full net income ($800/month after taxes) back into this at current margin rates (4.75%), then I’ll be paying down the margin loan at about 100-200/month. Once the lease on the property gets renewed (2006), I’ll be able to double those payments.
Does this seem like a reasonable alternative – keeping in mind that there’s the risk of the property going unrented (small, but possible), and obviously there’s the risk of a market crash causing a margin call (again, small but possible)
Answer: Much better alternative – you will find difficulty in obtaining conventional financing for only 2/3rds of a business/building.
If you were my client, that is what I would suggest you do.
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