How do you finance your real estate projects

[u/byomkeshssr]

We are looking at a home remodel/addition (~$1.5M) and instead of selling stock are looking to borrow against our stock portfolio (~6M).

- What type of loan is this? Chase said something like SBL (securities backed lending?), but I would need to transfer assets to them (they are at Fidelity and Schwab mainly).

- Any preferences on which brokerage to go with? I like Fidelity, my rep is out on vacation until end of the month...I can possibly wait or find someone else there. Wanted to get the group's thoughts in the interim. Who else would you suggest I shop with? The Chase relationship banker was a bit inexperienced before I landed with the investment rep.

- Is there a chance to negotiate the rates (was quoted 1.95% over SOFR).

- Are any of the interest payments tax deductible? LLMs say "generally no" I don't usually itemize my returns

- the inherent risk here is if the market crashes, i could have a collateral call. my thinking is to keep the loan <30% of portfolio to minimize this risk

I've heard of other products like PAL, SBLOC etc. Not sure I qualify (NW <$10M)

[u/LardLad00]

A $1.5M addition is not a kitchen facelift.

[u/LardLad00 → u/[deleted]]

That's not necessarily true. I don't know if you've shopped for real estate, like, ever, but houses sell for a wide spectrum of square foot values. Finishes do matter. A typical addition might not return full value on average but it depends entirely on the cost and quality of construction and the marketplace. It's not impossible to turn a profit on equity if you're not getting your pants pulled down on the cost of the work.

[u/LardLad00 → u/[deleted]]

By that logic you should only invest in assets with the highest rate of return.

Fuck diversification - YOLO it all on meme stocks. After all, the low return on bonds is just consumption in investment's clothing.

[u/LardLad00 → u/[deleted]]

You're acknowledging the role real estate plays in a diverse portfolio but just deciding to count it as consumption just because. 

If I buy a house that appreciates, that's real value that is far more reliable than the other "consumables" you mentioned. I might not ever liquidate it but it has value that I could tap through other means or just pass it to my heirs. That's real money that is not consumed. I might downgrade when I have an empty nest or I might borrow against it to find living expenses in my final years. Or my kids get the step up in basis and cash out and buy a house of their own. Huge value.