How to: 0 APR rehab financing using your brokerage account!

[Henry Lazerow]

I recently had a client use this strategy. How it works.....

- The stock market on average brings in roughly 8% returns

- You open a line of credit using the equity in your brokerage account through several third party services. The current rate for this is 4.5% floating so if interest rates go up this will go up if interest rates go down this will go down. I would not hold it open infinitely for this reason but can be great for a rehab and pay off over time or to refinance into a 30 year mortgage. BRRR.

- By borrowing at 4.5% on money that is making 8% you are making a net 3.5% spread. Getting below a 0% net interest rate. Much better then high cost rehab loans and red tape. The money is good as cash which can often get you a better price on contractors, etc. 

Liquidity: You only get charged interest on money you pull out not the whole balance. It is nice to have more funds available as needed. 

Risks: I recommend not maxing out the withdrawl and leaving yourself a healthy margin to avoid a margin call. If stocks fell sharply it could force a sale of remaining shares each company has there own margin call policy and process for this make sure you thoroughly read through it. A safe relatively risk averse limit is only pulling out 30-50% of available draw at a time.