Securities Based Lending for Low Interest Rate

[Brady Morgan]

Hello,

Does anyone have experience with using Securities Based Lending for funding deals? Specifically, I am looking at partnering with an individual who owns securities (stock and mutual funds) having them take out a line of credit against their portfolio (SBLOC) at a low interest rate, and using that to purchase properties rather than using a mortgage. Considering the rates I am being quoted, I am a little surprised more investors arent talking about this. Has anyone run into problems with this sort of lending? I know these lines of credit are typically variable rate and interest only but when I am buying deals with 20-25% equity that are new construction and cashflow around $500/mo with this loan option, I feel like I have hedged against those risks fairly well. There are sometimes fees associated as well but they seem minimal and scale well since one line of credit can purchase multiple assets.

Interested if anyone else is using this lending strategy and what your experiences/recommendations are. Thanks!

[Brady Morgan]

Quote from @Scott Wolf:

Quote from @Brady Morgan:

Quote from @Brady Morgan:

Quote from @Scott Wolf:

Quote from @Brady Morgan:

Quote from @Andrew Postell:

@Brady Morgan yes, some of us use this technique for temporary money.  These are usually from personal connections we have made through the years and the investors usually want proof of experience to participate in any deals.

Can you recommend any lenders in particular for SBLOC product? Would be great to have more to compare with what I already have quotes from.

 Schwab had the best rates I heard of (vs. Wells, Citi & Chase), but moving all your money for current rates might not be something an investor wants to do.

 Thanks Scott, ill check with Schwab. Investors are already on board with the options weve got, just shopping for the best option. Its easy to sell high yield deals.

Looks like the rates they advertise are a good bit higher than other options ive found. Will talk with them to verify, but im looking at rates currently from under 5% to about 5.5%.. seems even with their largest LOC its over 6% based on current sofr. I will admit they are better than some other big players, but can certainly find better rates out there.

 Where are you seeing those rates?

 Capital management firms and credit unions tend to have better rates. None of the major institutions have come close really. I believe it depends on the lenders funding source.

 Stone Creek has 4.9% and BCU has just over 5% if I remember right. There are others but those are some of the more recent ones I have talked to (in the last couple weeks) that had the best offers. Of course there are other factors such as fees, but so far I have found those to be relatively minimal.