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Using margin paydown as source of return
This may or may not be the appropriate forum for this but I think it's interesting and might get some people thinking:
We consider "debt paydown" as a source of return for real estate. For example, if you put 25% down on a a property, 20 years amort., and it breaks even cash flow-wise, the return is 7% (i.e. if you put 25k in an investement, and it grew to 100k 20 years later, it would have returned an annualized 7%). Not too bad considering it's just one of 4 ways to get return.
My question is ... can we duplicate this source of return via the use of margin on our stock / bond portfolio... Obviously, we can only "borrow" 50% and as long as we're property diversifed, we should be safe from margin calls, but we could even do 30-40% to be safer. Also is the fact that we would "reduce" the return of the portfolio becuase dividends would be used to reduce the margin balance over time ... automatically.
I think this is one of those situations where asset allocation and manangement would dictate the answer. In other words, it would need to be a fairly high yield portfolio, vs. growth, and the margin rate would need to be reasonable. Love to hear some feedback, especially from you numbers geeks out there!