401k, IRA & Margin Loans

[Tucker Cummings]

I'm looking into different ways to fund deals and am curious about using my 401k, IRA, and/or stock accounts on margin to help fund my deals.

I’m looking for answers to questions like:

• How much can I borrow?

• Am I removing the investments from the market as a funding source, or is it like a line of credit where the cash stays in my investments, but I am borrowing against them?

• When I Pay the interest, am I paying myself or the brokerage the interest? Is it different for the 401k, IRA or margin account?

Would love to talk to someone with experience in this arena! Thank you!

[Sean T.]

@Tucker Cummings, yes, you are reading it correctly.  It will typically show as a negative cash balance on your account but otherwise nothing changes.  Also, if you don't pay into the line you will see the margin loan grow but typically you can "fall behind" the 50% limit. 

You didn't ask this and it is not towards you but I thought I would share something else here as well.  If someone is reading this and thinking, this is a great way to avoid bank financing, please keep in mind this is really best for seasoned and well balanced investors.  If you do not have the ability to use a standard bank loan approach to real estate investing I urge you to continue saving, learning, and building credit.  The last thing I want is to see folks with small balances in their portfolios to run out and borrow against a volatile asset class.  Think of this as another arrow in the quill but best served as a way to access cash quick.