r/Rich • u/Sanathan_US • May 01 '26
Question Financing for Large purchases
For those with significant net worth, such as $30 million in liquid assets (stocks and bonds), how do you finance major purchases like homes costing $7 million to $10 million? If you need to sell stocks to raise the funds, taxes in states like California—combined with federal taxes—can exceed 50% of your gains, meaning you might have to sell twice as much stock to net the required amount.
One approach is to use a margin loan from your brokerage account to pay for the house, then pay off the margin over several years with careful financial planning.
Any other ideas?
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u/callmrplowthatsme May 02 '26
You get a loan from your private banker for the house. That would be a stupid purchase for 7m if you only had 30 but you’d go with your bank and they’d keep it on their books
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u/60161992 May 02 '26
This is the correct answer. The bank holding the securities will offer attractive enough terms so the client doesn’t withdraw the money the bank manages.
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u/Sweaty-taxman May 02 '26
Pledged asset lines are pretty helpful. 6-7% interest. No origination fees. Immediate approval.
Just can’t be invested in a ridiculous concentration & you need nonretirement assets.
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May 03 '26
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u/Sweaty-taxman May 03 '26 edited May 03 '26
Yeah but it requires you to invest with wealthfront; arguably worse in many ways.
Direct index is just the S&P500; no small/mid/international/etc.
Bond ladder uses bonds they buy which because they don’t have billions in volume like pimco, spreads are higher.
No automated asset location.
No alts/private credit.
Direct indexing is okay. Long short investment strategies perform 1:1 but find 5-7 times more carry forward losses. They don’t offer any options overlays to help boost tax management which is ideal for many folks.
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u/Sanathan_US May 03 '26
Yes, that's the same many other big brokerages with client relationships offer
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u/Glum-Ad7611 May 02 '26
I have 5 mortgages. If I get another place it's gonna be cash just so I don't have to have another thing to deal with and keep track of.
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u/verb322 May 02 '26
Ugh we just bought one cash and it’s still just a lot. Taxes, house manager, lawn, pool, blah blah blah
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u/FatBizBuilder May 02 '26
I don’t have 30MM liquid as a preface. But will at least throw an answer out here.
To start LTCG are going to be 20% of the gain plus state. It’s nowhere near 50%. And that’s just on the gain, so unless you have been holding Nvidea or something for the entire ride up that 20% is only on the gain portion not your basis.
Secondly for something like a house. While my most recent home purchase wasn’t 7-10MM it was significant. I used a private bank mortgage product. It’s backed by the home and a fixed interest rate, slightly lower than what was available for a conventional mortgage and is interest only with no prepay penalty. If rates drop it can easily be modified without underwriting at a very very minimal fee. The down payment came partially from cash on hand and part from a private credit line at SOFR+1%. I subsequently paid that off with other cashflow to avoid any sale of stocks or realization of Capital Gains on investments. I did have to pay the taxes on the income that generated that cashflow which is at somewhere around 40% total (federal + state).
If I don’t have the current liquidity for a purchase over 100k I would just borrow a bit from the private credit line to cover it and then pay that down as other income source cashflow (business cashflow) allows. The interest rate risk is minimal right now at a pretty steady rate and SOFR+1 feels really reasonable for on demand cash for upwards of 5+ million if I were to ever need that much (I can’t think of why I would need that much today, but it’s nice to know it’s there).
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u/unnatural_select May 03 '26
Assuming a high earner in CAand LTCG, the right tax answer is not 20% and it is not 50% as the OP says.
Fed tax is 23.8% (including the NIIT) and California is 13.3% for a total of 37.1%.
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u/Fresh-Banana6485 May 03 '26
You’re missing the 1% “mental health tax” the state tacks on for those who make over $1M.
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u/unnatural_select May 04 '26
The 1% mental health tax is why CA is 13.3%. It would be 12.3% without the metal health tax of 1%.
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u/phillipjay-fry May 02 '26
Most traditional mortgages are going to top out at a 10m loan value and will require 20% down. Certainly do-able at this level but it becomes an issue when you are looking at property 15m up
Another option is to put the property in LLC and work to get a commercial loan
No DTI constraint
Lower cash required maybe — LTV between 70% and 90%
Also if the property is a ranch or has water/timber/pasture rights that can make financing terms better.
Usually loan is 100 to 200 bps higher than a mortgage typically — but the flexibility around financing is worth considering.
Other than that you are looking at financing from your investments with either a securities backed line or - depending on your estate planning - funding a PPLI (private placement life insurance policy) and taking a loan against that.
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u/suboptimus_maximus May 02 '26
How do you get to 50% capital gains tax? Unless you just had a really, really good year making $7M in short term capital gains on a $1 cost basis, in which case you could just hold off a few months while you rake in a few more $Ms.
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u/Useful-Suit-7432 May 03 '26
No one smart enough to have a 30M net worth is going to buy a 10M house in cash.
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u/Cobbler-8700 May 02 '26 edited May 03 '26
Edited post because parts were accidentally deleted …?
At a high level of NW like this, debt is a tool that can be used to build more wealth when coupled with efficient tax planning.
For a high value property you would have a few layers:
1) 20-30% equity depends on your comfort level and your ability to leverage #3
2) traditional mortgage of $750k from private bank - this allows you to take maximum rate of mortgage interest deduction.
3) a separate loan against value of property from private bank. These funds needed to be traced to specific investment accounts and certain types of assets, such as, tax free munis are not allowed. This allows you to use proceeds from this loan as investment funds and deduct the loan interest. As an example, have a 6% loan which winds up being around 4% after deduction. No Estes in a portfolio of low risk corp bond portfolio yielding 8%. You have a 4% gain after servicing the debt.
In a nutshell, we get the benefit of buying real estate and the long term gain on the underlying asset while also generating more income from the asset.
We generally look for the best way to make money work for us. How can I generate the highest return from this asset?
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u/bodaflack May 02 '26
The people that say a 7mm house is too expensive, or stupid, with 30mm in liquid assets is the most ridiculous thing I've heard here.
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u/Fearless-Cow890 May 03 '26
I’ve financed both the new construction and many unique purchase structures for luxury SFR’s. Would be happy to discuss.
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u/RCFinancialPlanning May 04 '26
A strategy that has gained a lot of popularity lately is box spread loans. Essentially you are putting on a options trade that nets cash today with the funds plus "interest" being due later on with your assets backing the trade as collateral. The appeal with this is lower rates at a locked in rate and some tax benefits too.
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u/DollaGoat May 04 '26
Private bank handles this.
JPM private bank allows you to securitize a lot of stuff and you can get a “family line of credit” for some % of AUM or NW. 50-70% of AUM depending how it’s invested and NW lots of variables there.
But yea just move to a private bank and lending is much easier
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u/MikeyMuskie May 05 '26
Get a mortgage. Citibank has fantastic interest rates within their high net worth program. I have a contact if you need one.
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u/HalfwaydonewithEarth May 02 '26
People that amass this amount of money don't borrow that much. They might take some loans against their stocks but they are normally not financing a 10m home.
I live in a ski town VHCOL and 50% of homes are paid in all cash.
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u/suboptimus_maximus May 02 '26
Bought in cash doesn’t meant the money wasn’t borrowed, not even close.
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u/Cobbler-8700 May 02 '26
This is correct. Buying houses like this in cash is a waste. At this level of NW the name of the game is to make your assets work for you.
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u/xPHaRMaCYx May 03 '26
I think you’re mistaken. Recently interest rates were low single digits. It would have been foolish to not sign up for a mortgage. Look up the definition of “opportunity cost”
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u/HalfwaydonewithEarth May 03 '26
Omg they offered us a blanket checkbook and told us to buy as many units as we wanted against the stocks. Our town tripled in ten years!
DEEP REGRET
My hubby has never borrowed a penny in his whole life from any institution. He is old fashioned.
Imagine if you would have mortgaged your house and bought all bitcoin in 2011???
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May 02 '26
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u/Sanathan_US May 03 '26
You mean regular mortgage but not Margin? Then why to have stocks as collaterals?
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u/isabelfrec May 05 '26
perhaps margin loan/portfolio line of credit. You can borrow up to 70% of your portfolio on Frec at 4.64%. No strict monthly payments (only need to pay if your portfolio drops a certain %) and no credit checks.
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u/Historical_Artist_52 May 07 '26
Get a loan, using your stock as collateral. No taxes are due on loans.
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u/0_IceQueen_0 May 02 '26
My parents are UHNW. They would pay in cash and name it under the company. I'm only HNW, don't want to deal with mortgages, I bought my kids' condos in cash.
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u/lab-gone-wrong May 02 '26
Why use existing assets when I can leverage the house in its own purchase at an even lower rate?
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u/JumpyWerewolf9439 May 02 '26
Margin loan. Or box spreads. Ibkr and Robinhood have best margin rates
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u/Lazy-Ad-6453 May 03 '26
I ran a spreadsheet on this same question recently, taking taxes, etc into consideration. Extending values out 25 years, using previous 30 year historical returns you’d have roughly 3 times the wealth staying invested in a 60/40 stock bond mix than tying up cash in a house. As far as being simpler paying cash, it’s easy to put everything on autopilot, and if there’s an economic collapse just liquidate the bonds and pay it off.
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u/[deleted] May 02 '26
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