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Updated almost 3 years ago,

User Stats

7
Posts
6
Votes
Gus G.
6
Votes |
7
Posts

Margin Loan Question - $5mm Property

Gus G.
Posted

Hello All,

I'm new to this sub but I've been a follower for a few months. I have a question regarding margin loans.

Background:

My family owns about $40mm free and clear in multifamily (111 units - we live in a fast-growing metropolitan city). Recently, we sold our interest in a project and decided to 1031 the proceeds ($1.87mm) into a multifamily property. As everyone knows, 1031 only allows for a 45-day window to identify a replacement property and 180 days for closing. We ended up finding a great 22-unit property at $5.2mm.

Since we are in a competitive market, we wanted to offer the quickest closing possible, so we made the decision to go on margin to make up for the other $3.33mm as a temporary bridge loan and offer a 22 day, all-cash offer. The offer was accepted, and we closed on the property three weeks ago. 

  1031: $1.87                                                                                                                                                                                            Margin: $3.33mm
Total:
$5.2mm

Question:

The margin loan is attached to a larger investment account ($20mm+), so we have breathing room should there be a call for margin. Margin loan interest rates fluctuate daily by several basis points, but currently, ours sits between 1.35% - 1.45%. The purpose of using margin was to close on the property quickly. But now that we've closed on the property, we'd like to shop around for a conventional loan, so we can lock in a low(ish) interest rate before the fed increases. Ideally, we'd like to refinance as much of the margin loan as possible, all $3.33mm. Where should we begin looking for conventional loans? What terms should we be looking for? Should we just sit on the margin loan? The margin loan is collateralized to bonds, not stocks. This is our first time shopping the debt markets and would love any guidance. We are a small family office, long-term holders, with no outside partners.

Thanks!

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