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Old 05-03-2016, 06:38 PM   #61
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I don't think mortgages can be called. Your house can be foreclosed on if you fail to keep up with mortgage payments, but they won't foreclose just because the market value of the house has dropped.

You can do what you want. You can promote what you want. But don't mislead people with falsehoods.
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Old 05-03-2016, 06:43 PM   #62
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Originally Posted by calmloki View Post
So I get all excited when hearing about saving on interest rates - heck, Penfed is charging us 3% on a 5/5 adjustable. Not familiar with margin borrowing, so I Googled:

Vanguard Margin Interest Rates 2016

6% for loans in the $100k-$500k range? What am I missing?
I believe Interactive Brokers is quite a bit less, under 2%.

https://www.interactivebrokers.com/en/index.php?f=1340

I have been known to use a HELOC to pay off a rental mortgage, or buy a rental outright. I then quickly pay off the HELOC. I am likely going to finish off a rental mortgage at year end with my HELOC, if I do not get it paid off by then.

Partially paying off a rental does little good. Cash flow doesn't change, the monthly payments are the same, and the interest paid deduction is smaller, so you pay more taxes.
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Old 05-03-2016, 07:29 PM   #63
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Interesting discussion on RE options, but it really does depend on where you live (assuming you want/need to see the property regularly). Living here in the Bay Area (Northern CA) the real estate market is so hot that even distressed properties are snapped up in a jiffy and there are precious few "bargains" to be found.

In my situation I'm thinking of dabbling more in REITs or in a service like PeerStreet. Seems like a relatively easy way to get in the market. Any thoughts on that?
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Old 05-03-2016, 07:42 PM   #64
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Originally Posted by RunningBum View Post
I don't think mortgages can be called. Your house can be foreclosed on if you fail to keep up with mortgage payments, but they won't foreclose just because the market value of the house has dropped.

You can do what you want. You can promote what you want. But don't mislead people with falsehoods.
Please, a loose comparison and you are correct. You can pay your margin and keep your stock, you can pay your mortgage and keep your house. Not misleading anyone and certainly not promoting anything (how could I be?). The rich use margin to their advantage, very low rates and easy to tap. I use a little and as my wealth grows I'll use a little more, but with caution. Although I don't have a mortgage, I do have a heloc if needed.
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Old 05-03-2016, 07:47 PM   #65
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Interesting discussion on RE options, but it really does depend on where you live (assuming you want/need to see the property regularly). Living here in the Bay Area (Northern CA) the real estate market is so hot that even distressed properties are snapped up in a jiffy and there are precious few "bargains" to be found.

In my situation I'm thinking of dabbling more in REITs or in a service like PeerStreet. Seems like a relatively easy way to get in the market. Any thoughts on that?
The REIT route is what I've taken on a small scale. Having dealt with the direct ownership route I really don't see what that would have to do with ER. Periods of relative inactivity followed by PITA hassles that far exceeded those in the everyday workplace.
IMHO peerstreet looks like a bunch of kids trying to work an angle. To each his own/
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Old 05-03-2016, 07:52 PM   #66
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Originally Posted by calmloki View Post
So I get all excited when hearing about saving on interest rates - heck, Penfed is charging us 3% on a 5/5 adjustable. Not familiar with margin borrowing, so I Googled:

Vanguard Margin Interest Rates 2016

6% for loans in the $100k-$500k range? What am I missing?
Well don't run out and load up on margin based on my posts, but eTrade is a flat 3 or 3.25% for a Platinum account and Interactive Brokers is under 2% even for <$100k. They can change rates at anytime, but they generally follow a benchmark+, like the fed funds rate.
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Old 05-03-2016, 08:10 PM   #67
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The REIT route is what I've taken on a small scale. Having dealt with the direct ownership route I really don't see what that would have to do with ER. Periods of relative inactivity followed by PITA hassles that far exceeded those in the everyday workplace.
IMHO peerstreet looks like a bunch of kids trying to work an angle. To each his own/
Thanks! PeerStreet was recommended by Mr Money Mustache, one of my favorites, so I was treating it more seriously than most. But overall REITs seem like a better way to go. I agree direct ownership could be a lot of work but if you like spending your time that way it all works out.
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Old 05-03-2016, 08:25 PM   #68
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Please, a loose comparison and you are correct. You can pay your margin and keep your stock, you can pay your mortgage and keep your house. Not misleading anyone and certainly not promoting anything (how could I be?). The rich use margin to their advantage, very low rates and easy to tap. I use a little and as my wealth grows I'll use a little more, but with caution. Although I don't have a mortgage, I do have a heloc if needed.
Even a loose comparison between the two is inaccurate. Mortgage payments are predictable and scheduled. A margin call can come suddenly and has to be satisfied immediately, and if you are offline and cannot act, your broker will sell whatever they choose. This happened to a co-worker of mine, years ago. He was out of the country and they sold the holding he least wanted to get rid of, just before it bounced back and he missed out.

But assuming you are correct about low rates, I agree accessing extra money via margin is a lot easier than a mortgage, and with no extra fees. Do "the rich" actually use margin regularly? I don't know, but I'd be surprised if that's generally true. I could be wrong. I still remember the dotcom bubble burst, and Black Monday of 1987, so it's not for me.
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Old 05-03-2016, 09:36 PM   #69
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Even a loose comparison between the two is inaccurate. Mortgage payments are predictable and scheduled. A margin call can come suddenly and has to be satisfied immediately, and if you are offline and cannot act, your broker will sell whatever they choose. This happened to a co-worker of mine, years ago. He was out of the country and they sold the holding he least wanted to get rid of, just before it bounced back and he missed out.

But assuming you are correct about low rates, I agree accessing extra money via margin is a lot easier than a mortgage, and with no extra fees. Do "the rich" actually use margin regularly? I don't know, but I'd be surprised if that's generally true. I could be wrong. I still remember the dotcom bubble burst, and Black Monday of 1987, so it's not for me.
Disagree, a loose comparison to me is a choice of collateral/debt, and borrowing on margin is a preferred substitute for a variable mortgage because of the flexibility, low rates and penny one tax write off. And, if you read my posts, there is near zero chance of a margin call. The reits, bond funds, preferred, bdc's and dividend payers would need to decline 70% on the whole portfolio if I was fully margined, but I'm not, I personally only borrow 20% max. It would take a >90% decline with (real) blood in the streets for a call.
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Old 05-03-2016, 11:55 PM   #70
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Having never borrowed on my equities, I am unfamiliar with the real workings of margin loans; but, I can't believe that I can borrow hundreds of thousands of dollars from a brokerage at a fixed rate for 10-30 years...... Can someone enlighten me if this actually is possible.


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Old 05-04-2016, 09:20 AM   #71
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Having never borrowed on my equities, I am unfamiliar with the real workings of margin loans; but, I can't believe that I can borrow hundreds of thousands of dollars from a brokerage at a fixed rate for 10-30 years...... Can someone enlighten me if this actually is possible
No, it is not possible to borrow at a fixed rate. It is always a variable rate. If rates go up fast, so will the margin interest rate. Also, research "portfolio margin", a must, so no single security would be the measure of risk (margin call).
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Old 05-04-2016, 09:40 AM   #72
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No, it is not possible to borrow at a fixed rate. It is always a variable rate. If rates go up fast, so will the margin interest rate. Also, research "portfolio margin", a must, so no single security would be the measure of risk (margin call).

Thanks. So this whole thread seems a bit bizarre. I certainly would not borrow using a totally variable note with absolutely no controls on increases in rates for a percent or two on a piece of real estate I will be holding for a period of time. Too risky for me!


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Old 05-04-2016, 09:43 AM   #73
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Thanks. So this whole thread seems a bit bizarre. I certainly would not borrow using a totally variable note with absolutely no controls on increases in rates for a percent or two on a piece of real estate I will be holding for a period of time. Too risky for me!
agree 100%
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Old 05-04-2016, 09:56 AM   #74
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I believe Interactive Brokers is quite a bit less, under 2%.

https://www.interactivebrokers.com/en/index.php?f=1340

I have been known to use a HELOC to pay off a rental mortgage, or buy a rental outright. I then quickly pay off the HELOC. I am likely going to finish off a rental mortgage at year end with my HELOC, if I do not get it paid off by then.

Partially paying off a rental does little good. Cash flow doesn't change, the monthly payments are the same, and the interest paid deduction is smaller, so you pay more taxes.
I agree with Senator on this. We currently have a HELOC with 1.99% for one year and I intend to pay it off within a year so all our properties are mortgage free. My accountant says that all the expenses and interest for the loan are deductible as a business expenses. We are also making all long term repairs/maintenance now while my earnings are high so that we have low expenses on the rentals when I retire.
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Old 05-04-2016, 10:34 AM   #75
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Interesting discussion on RE options, but it really does depend on where you live (assuming you want/need to see the property regularly). Living here in the Bay Area (Northern CA) the real estate market is so hot that even distressed properties are snapped up in a jiffy and there are precious few "bargains" to be found.

In my situation I'm thinking of dabbling more in REITs or in a service like PeerStreet. Seems like a relatively easy way to get in the market. Any thoughts on that?
I live in the Bay Area (Castro Valley) too and I agree with you that the bargains are virtually non existent. You can still make money the old fashioned way; buy, rent and hold over long periods of time. It has worked for me.
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PeerStreet & LendingHome
Old 05-04-2016, 11:04 AM   #76
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PeerStreet & LendingHome

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...
In my situation I'm thinking of dabbling more in REITs or in a service like PeerStreet. Seems like a relatively easy way to get in the market. Any thoughts on that?
I keep considering one of these newer services and actually know some of the folks involved with LendingHome which looks very similar to PeerStreet at first glance. These seem like nice diversifiers with limited hassle; but, I just keep sticking with REIT's (actually, mostly ETF's and funds within tax advantaged accounts) for their simplicity.

If I ever spend the time to do any real in-depth analysis of things like LendingHome and PeerStreet, I will start a new thread on the subject.
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