Sell equities now and invest in new home construction

[Matthew Lenning]

hello BP community

I own a lake front rental property in the red hot upstate NY market that I'm using for STR. I'm cash flowing between 8k-10k a month. The house sits on a double lot so there is potential for development. I have a healthy equities portfolio of 1.3 M that I would use to pay for the building of a second home on the adjacent property--estimated budget of 250-300k. Equities have done very well the last 10+ years so I feel pretty confident this deal is a better vehicle for growing a portion of that money. Is this a total no brainer or what?

[Henry Clark]

Don’t have all the info so adjust as needed. 

1.  Keep investments and cash around you.   Use leverage as much as possible especially with interest rates so low

2.  Manage your risk.   This is a personal decision.  Either shoot for aggressive in both the stock market and the rental or just one.   I would pull the cash selectively out of the underperforming equities.   

3.  If your existing rental has both enough equity and cash flow then use it as collateral for the new add.  Don’t use cash or stock

4.  Either way recommend you separate the legal properties.  it is a lot easier to do now, than ask a bank later to split.  Banks hate giving up collateral and you may choose to use one of the properties as collateral in the future with a different bank

5.  If you don’t have enough equity in your current rental   But you don’t want to sell your stock then open a separate broker account.   Move as much stocks into it as needed and assign to the bank as collateral.  Check with the broker and the bank the degree to which you can trade these equities