jay21 Posted December 21, 2013 Share Posted December 21, 2013 This may not be the best forum for this question, but I may be able to obtain some non-margin leverage through a relative and would like some advice. This relative is risk averse and generally has a lot of cash. They would prefer this cash make a higher return than a HY savings account. I mentioned the possibility of borrowing for them and paying interest and the person seemed receptive to lend a high amount relative to my own net worth (which is pretty low). My first thought was to borrow a lot but I want to make sure I offer a fair rate of return relative to my risk as a borrower, but also to make sure that I can achieve a sensible ROE. What rate do you think would be fair for this risk? Note that I would pledge my earnings from job to cover interest payments and principal as well. How much should I borrow relative to my own net worth? Also, it might be worth noting that my salary is roughly 1/2 of my net worth. Also, they seemed to be flexible on when I can pay back the principal. One thing I was thinking if I pay them the 10 yr plus 100bps with no maturity, but I can prepay at any time. Does this sound reasonable? Can you think of any custom transaction that would be beneficial to us both? The reason I placed this in the BRK forum is because I would place all the money into BRK, which I believe to have very little risk in terms of compounding at a sensible rate over a long time. Therefore, we would have to consider the return of BRK in order to know at what payment rate am I making a negative return. I also wanted to see what people who are familiar with BRK would have to say and what they would do in my shoes. Thanks for any comments/suggestions. Link to comment Share on other sites More sharing options...
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!Register a new account
Already have an account? Sign in here.Sign In Now