Poll: Leveraged investments...

[Luck_Club]

Once again I find myself in the Marketable Security MS Vs Real Estate Investment debate. So I think it is time to settle this for the whole world to see.

So have you ever borrowed money for your investments?

Details did you make or lose money etc. in the comments

 

[RobbieB]

No.

Have never borrowed on investments to buy real estate or borrowed on real estate to buy equities.

I do have a free line of credit secured by equities, but have never used it nor plan to.

 

[Luck_Club]

It's been a while since my last acquisition, but this is an example buy:
Purchase price = $200K
Down = 20% =$40K
Improvements= $14K
Rents=$25,200
Tax=$3600
Insurance=$900
1st year deductible interest=$8000
Net yield first year=23.5%
Each year after the first gets better, as the rents increase and the debt is retired. 80% leveraged. NO appreciation.

 

[pb4uski]

Not directly. I have occasionally in the past did some cash out refinancing.... most times to get a lower rate but since I'm refinancing anyway sometimes I took cash out too... I guess incrementally the cash ended up in investments.

Probably made money because I rarely lose money on investments.... none of my current purchase lots is at a loss. Harvested some losses in 2008-2010 and used them to gains trade in 2011.

 

[easysurfer]

On the poll, there's no option to select "No way Jose" .

 

[REWahoo]

On the poll, there's no option to select "No way Jose" .

Or "You gotta be kidding me!"

 

[W2R]

Or, "I may have been born in the morning, but not THIS morning!"

 

[NW-Bound]

On the poll, there's no option to select "No way Jose" .

+1

I did borrow money to buy the home I live in, which has been paid off long ago.

But I think the OP asked about investment RE, not a residential home.

PS. On rare occasions, I did go on margin for an amount in the 5-digit range, when I wanted to make a short-term bet and did not want to move cash from other accounts such as I-bonds. This amount was around 1% of my investable assets, and a small portion of the cash in those other accounts.

 

[RetireAge50]

I have a 2.95% cash out mortgage I put in investments. Up more than 15%. Kinda fun and so far profitable. Also borrowed to fully fund Roth IRA and 401k. Worked great for me.

 

[Sunset]

My biggest risk was I borrowed approx $60,000 and bought stock with it, after the market had tanked.
After a couple of years, the I paid it back and kept the profit of approx $25,000 after subtracting out the borrowing costs.

 

[Cayman]

.

No, and no regrets that I haven't.

 

[Another Reader]

Most of my properties were bought with leverage. A few were bought for cash on sale in 2009-2012. Lost money on a couple mistakes, including a flip. Live and learn. Many of the mortgages are paid off. Overall, made substantial gains and harvest a lot of income.

Never borrowed to buy paper assets. Volatility magnifies the risk.

 

[traineeinvestor]

Borrowed to buy most of our properties - very happy that we did so. We did not make any additional repayments as I headed into retirement.

We have borrowed to buy bonds as a carry trade. The amounts are not much.

Currently total debt is just under 10% of total household assets and we are very comfortable with that. As loans are paid off, we will probably borrow again if the investments make sense.

 

[Luck_Club]

On the poll, there's no option to select "No way Jose" .

I knew I forgot a choice. Any way I can add never borrowed money?

 

[ChiliPepr]

If you have a mortgage and investments isn't that borrowing money for investments?

What is the difference between these two people:

Person A has $500k and uses it to buy $250k in stocks and a $500k house with a $250k mortgage

Person B Has a house worth $500k and takes a mortgage for $250k to buy stocks

 

[97guns]

Details did you make or lose money etc. in the comments

.



Made money with RE but not cashed out, bought 4 homes in 2009 financing 2 of them and free and clear on the other 2. I put a down of $20k on each house financed, payments are $306 and $375 and valuations have gone from $80k to $280k, equity gains from the leveraged properties have turned my $20k investment into $220k just in equity gains, I’ve netted an additional $75k in rents which covers the cost of the house.

 

[Danmar]

I have been debt free for a long time, but during my working life I borrowed extensively from my employer to buy their stock. Interest rate was fixed at the dividend yield with very small principal repayments. It seemed like a “no brainer” at the time and worked out exceptionally well. Having said that, now that I am retired, I would NEVER borrow money, period! For any reason.

 

[97guns]

When I run numbers for RE my ROI is always better when leveraging

 

[ERD50]

....
PS. On rare occasions, I did go on margin for an amount in the 5-digit range, when I wanted to make a short-term bet and did not want to move cash from other accounts such as I-bonds. This amount was around 1% of my investable assets, and a small portion of the cash in those other accounts.

Similar to this, I've gone on margin in order to free up some cash instead of selling a stock/fund and owing Short Term Cap Gains, when they would be LTCG in just a month.

Didn't fill out the poll as that didn't seem to match. I don't see the point in make/lose money question. You can ask that of lottery ticket buyers. Whether they won or not doesn't change the odds going in.

Historically, the market has gone up over long periods, so leveraging should increase returns - unless you blow up on a downturn (a very real issue if you leverage much).

-ERD50

 

[Danmar]

When I run numbers for RE my ROI is always better when leveraging

It always is when you “run” the numbers. It’s the actuals that might be a problem.

 

[W2R]

I knew I forgot a choice. Any way I can add never borrowed money?

I'll add it.

 

[Luck_Club]

I'll add it.

Thanks.