Securities Backed Line of Credit (Pledged Asset Line)

[Kyle Collette]

Hey BP Community,

Question for you all: Looking to open a Line of Credit (called a Pledged Asset Line by Charles Schwab) against my brokerage investment accounts. Does anyone have any experience with this? I opened a HELOC early last year and was wondering how the process is different.

I spoke with Charles Schwab yesterday and got an overall view, but wanted to check to see if anyone has had any experience (positive or negative) doing this.

The plan is to use the PAL to make "cash" purchases and then immediately refinance (using delayed financing).

Any advice/insight is appreciated!

[Kyle Collette]

@Tom S.  very true! 

@Malcolm Douglas - I completely understand where you are coming from. My strategy is similar, I would just be using a line of credit for (depending on purchase price) either the down payment, or for the entire purchase and then use delayed financing to immediately refinance and pay back the line of credit - either way having 100% financing (if calling the line of credit "financed" or "leveraged"). My savings/checking accounts don't have nearly the same size funds available that a 100-150K line of credit would provide me, so just looking for more access to capital. Definitely not for everyone and has the potential to be more risky for sure; I just feel that if I am smart with my investments and maintain good lending relationships for refinancing back out, I have more purchasing power for the potential for "cash" purchases and quick closings in the eyes of sellers, as well as mitigating much of the risk involved by paying as much of the  line back as quickly as possible and using the cash flow to continue paying it down.

 Funny that I just asked this question.. going back through old podcasts and midway through #55 and Jimmy Moncrief is speaking about cross-collateralization and pledged asset lines.

@Joshua Dorkin and @Brandon Turner - looks like you guys know all the right people to answer my questions! Ha

Thanks for all the insight and feedback, guys.