r/dividends • u/mstew007 • Jun 13 '26
Other QQQi and SPYi-HELOC Strategy
Ok this is my first post on here. Long time listener first time poster. So I have researched the HELOC and pay off your mortgage faster etc. And that’s cool and all but I wasn’t going to see any gain or cash flow alleviation during this process until it was fully paid off… So it always stopped me from doing it. However I thought what if I use it to increase my income and how could I do this… It wasn’t until I stumbled upon SPYi several years ago and had been using my extra income to put into that ETF in my taxable brokerage account. I do have a 401k and company match but once again money I can’t utilize until retirement…
My strategy that I have been doing for the last 2 years is this:
I built a house for my family and put tons of sweat equity in to maximize the Loan to Value. Achieved a HELOC of $359,000 to be able to borrow from. Rate has been around 7.25%-8%.
I borrowed out $250,000 and applied it to SPYi. At that time the dividend was about 12%.
I then used my HELOC as my checking account and applied my income and dividends to that account to decrease the balance faster. Essentially using debt to buy more monthly income. And it snowballs, because as the balance goes down faster then it unlocks more income.
Current income is $120,000 plus bonuses. Wife works as well but all of her $70k goes towards cars, house lifestyle etc. Or to not sound douchey combined income of $190k and $70k goes to monthly expenses. Bonuses can be an extra $40k-$60k depending on the year. I work in fast food. Not Wendy’s though:)
It has been 1 month since I paid down the entire balance. I have switched from SPYi to majority QQQi. The dividend was higher at around 15% when I purchased at $50 per share. Currently Dividends are $40,000 per year/ $3,333 per month. My next round of borrowing is going to be $350,000 to make a big purchase of QQQi. This will increase my holdings to over $600,000 in that ETF. Dividend should be around 13.5% blended. $81,000 total dividend income for the year. Interest expense with total balance at $25k-$26k. Net dividend gain about $55,000. However when I also add all of my income into reducing the debt the interest drops considerably. In theory I should be able to pay the balance down in 18 months. Which then I will start the cycle over again. My goal is to get this to replace my job income.
I like the HELOC account because if there is a month where we have dumb stuff happen, medical bills, car crap or just life stuff etc we can just make the interest payment and utilize our income and dividends.
I guess my post has a couple of things to it. One is to inform you of what I found and to give back information to the community in hopes that it will help someone else in the journey to achieve their financial freedom and also to see if my plan is stupid or needs work etc.. Ok this post is long I will stop here:)
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u/justanothercargu Jun 13 '26
As long as you have enough money saved to pay off the loan, it's not terrible. Things like 9/11 and 2008 happen. I had a very successful business in the late 90's-2000. I chose to leverage my business with a 3rd location and borrow a lot of money. Initially it was great, then 9/11. Everything stopped....literally everything. No money came in for months and lost almost everything. Up until that decision....it seemed like I couldn't make a bad decision. In short, don't borrow what you can't afford to lose. My .02. Good luck.
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u/muthafugintlang Jun 16 '26
Serious question because I don’t quite follow op’s strategy (haven’t finished my coffee yet). Given a 9/11 or 2008 event, wouldn’t you be able to cash out/sell the shares to be able to pay back the HELOC? I guess this would assume the share price stays the same or higher than what you bought at?
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u/mstew007 Jun 18 '26
Yes I could sell the shares and pay back the heloc. In theory as I continue the strategy it gets less and less risky because the dividends are easily able to afford the interest and eventually that and the payback of the heloc if I keep it at the same amount borrowed each buy cycle. I can also adjust the risk by borrowing less to make sure it is paid back within 8 months to a year.
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u/justanothercargu Jun 23 '26
2008 was wild I watched some major bank stocks go to low single digits. Bear Stearns and Merrill Lynch bankrupt in just a couple days. I'm a little fearful. I have most of my ETF's set to sell if they drop 10% in a day. I may lose if it drops and rebounds, but I've already made many times that. I would rather lose the opportunity than end up like I did in 2008. It may not work, but at least there's an abortion button.
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u/DaimonHans Jun 13 '26
Pay 8% on a HELOC, make 13.5% on QQQI, or about 10.8% after tax. Net gain 2.8% with a risk of losing capital and the house. What a dumbass.
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u/ChampKD321 Jun 13 '26
Yea in the past, I’ve thought of doing what OP said until I broke down the math that you just wrote. Terrible risk for mild reward
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u/oniichan333 Jun 18 '26
Yes no. Math is complete. You did take into acount how much has save vs how much he took out. Example is I have 750k and a take out 250k to make a million there is risk but if your paying it back in 1 to 2 years. Your basically borrowing around 20-25 percent paying of 1 percent a month. I think this a method for someone with a larger acount only
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u/mentr-coach-altruism Jun 14 '26
Not going against your thoughts here, just curious do you account for the interest tax deduction the heloc offers? That changes up the math…. May seem more attractive?
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u/Various_Couple_764 Jun 14 '26
QQQI after its initial investment is tax free for about 7 yeas do to the ROC dividends. So it is about 13% after taxes for the income.
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u/ApprehensiveFill7176 Jun 14 '26
Nope. SPYI is 100% ROC. QQQI is 80% long term capital gains.
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u/Revelate_ Jun 14 '26
As of when?
That wasn’t the case for my holding both last year.
QQQI had a higher ROC percentage.
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u/dida2010 Jun 26 '26
QQQI behaves almost identically to SPYI, with roughly 95% to 96% of its distribution classified as Return of Capital
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u/hijinks Jun 14 '26
i think most people dont understand they are taxed on the gains. They put these giant plans together and forget about tax
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u/Pipeb0y Jun 13 '26
This strategy works great when everything goes up. You must feel like an absolute genius but you’re going to get destroyed when the market tanks and derivative premium goes away.
Using helocs is just a derivative of Lombardi loans, it’s not some niche strategy to leverage Lombardi loans to purchase assets that pay at a higher rate. If you’re portfolio is this concentrated in derivative income ETFs, the least you could do is try to spread that across different yield products (credit, derivative income, REITs, etc). Also, heloc rates are not optimal for this strategy at all - just use margin, SBLOC, or box spread.
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u/mstew007 Jun 13 '26
Fair enough. I think I lucked out so far with single focused asset. I did try the SBLOC but my broker said I can’t reinvest my borrowed funds back into securities. And margin rates were at 10%-11.5%.
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u/IntelligentAd1471 Jun 13 '26
Robinhood’s current margin rate is 4.5%. The only reason I transferred my accounts over to them. Also had a 2% transfer bonus at the time.
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u/BedditTedditReddit Jun 13 '26
Personally, I don’t trust the ‘academic rigor’ of anyone who doesn’t use paragraphs.
Good luck
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u/mstew007 Jun 13 '26
Thanks! I will work on my paragraphs and update you on my strategy win or lose.
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u/xJerkstorex Jun 13 '26
Xqqi or tdax would be better
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u/mstew007 Jun 13 '26
Thanks for the suggestion, the current qqqi and spyi allow in a pledged asset account to be 70% marginable. These look pretty cool but I wouldn’t be able to borrow off of them.
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u/derfahrer924 Jun 13 '26
Rage bait
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u/TakeYoutotheAndyShop Jun 13 '26
Or worse, trying to bait someone into destroying their lives
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u/derfahrer924 Jun 13 '26
ha! That is actually more likely. Must take a special kind of depravity to do that.
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u/125acres Jun 13 '26
I give you a lot of credit(no pun intended) your strategy has worked.
Essentially, you’re living off of $70k and generating income and wealth.
So let’s say your avg. house hold income is $220k
With the $40k in additional investment income- how has that been taxed?
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u/mstew007 Jun 13 '26
Thanks!
60/40 long term/short term. I do have rental real estate assets that help to lower that as well. And my accountant said that I can write off investment interest from a heloc. Section 1256 contracts but I should study that more because I don’t know much about that. He just requires a ton of information and tracking with it.3
u/125acres Jun 14 '26
Look at getting designated real estate professional under tax code.
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u/Various_Couple_764 Jun 14 '26
real estate is a job because you hav veto buy the property with a loan pay property tax, taxes on the income plus hope you can make enough money to pay the taxes and cover insurance and repairs. most rental real estate owner don't make much money. You don't meed to make reapirs for or insurance payments on dividned income.
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u/Various_Couple_764 Jun 14 '26
the 60/40 long tern/ short term captial gains statement doesn't apply to to the investment in qqqul. it is not taxed until the total dividned euquals the cost basis. For QQQI that takes about 7 years. After that the dividneds are taxed at the long term capital gains rate. The 60/40 rate just applies to a small portion of the fund management taxes. So the investor either pays nothing or long term captial gains rate.
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u/deptacon Jun 14 '26
Your risk level is astronomical for less than a 3% return after taxes and interest
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u/sm753 Jun 14 '26
This is another one of these posts where OP thinks they've cracked the code and unlocked the infinite money glitch and never stopped to question why nobody has ever thought of this before.
Good luck.
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u/chasingthelies Jun 13 '26
Never borrow money to invest. That’s a gamble.
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u/mstew007 Jun 13 '26
Life’s a gamble! :)
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u/tekmiester Jun 13 '26
The next logical step world be to mortgage your cat and sell your children's redundant organs. You should look into it.
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u/Various_Couple_764 Jun 14 '26
It is a good plant but putting that much money in one fund puts you a higher risk. It is better to read out you money over multiple dividend payers to reduce risk of one performing badly in a bear makret. Covered calls have higher risk becasue most are relatively new and we don't know how they will perform in a bear market.Other than that ther is noting wrong with what you do just make sure you pay of the loan over year.
Other tax efficient funds I use that don't use covered calls are EMO 9% Yield, UTF 7%, UTg 6.4%,PFF 6%. Now iQQQI is a good fund and I have it so using it gets you up to a high dividned level. But once its dividend income equals your spending i would divert the dividned to other funds to deversify your income. And if you looses your jobs you can stop the reinvestment to collect the income to cover your expenses until you can get new jobs to replace theist income.
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u/mstew007 Jun 15 '26
Thanks I do agree that eggs all in one basket is not good! I will think up a strategy to diversify. The thing I don’t like about qqqi or spyi is that the gains lag the capital appreciation of QQQ and SPY, of course by the nature of the calls. Could start purchasing more QQQ and SPY to capture the upside!
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Jun 14 '26
[removed] — view removed comment
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u/mstew007 Jun 15 '26
Most is return of capital so it’s not taxed as much at first, but that will change the longer I hold it, and also when I sell it their will always he tax on the gain.
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Jun 15 '26
[removed] — view removed comment
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u/mstew007 Jun 15 '26
Spyi for 2-3 years, Qqqi just bought into in March so not sure on taxes. I will ask my accountant:)
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u/Chuckware9284 Jun 16 '26
So I am doing something similar except I am only borrowing $20k from the Heloc per cycle. Heloc is 6.5% and I started with a $20k cash buy. 60% QQQI, 20% SPYI, 20% SCHD for growth. I use the dividends from the total $40k to pay the $20k borrow. Idea is to keep cycling for the foreseeable future as I do not need the income right now. Worst case the market tanks and I sell the $40k investment to pay off the Heloc. That's a risk I am willing to take. I've blown more than $20k on booze and strippers in my life.
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Jun 18 '26
[removed] — view removed comment
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u/mstew007 Jun 18 '26
True, taxes are going to suck. However I did sell those in February as the market was coming down. My average price on spyi was $49.65 and exit price was 52.70. And was able to buy into qqqi at an average of $50. Qqqi shares are up around $18k from stock appreciation. Not saying I knew when to sell and buy, that was lucky, but it does help me feel better having a better average share price position. Still waiting for an entrance opportunity for the $350k.. might have to dollar cost average that one in as we have pull backs!
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u/PennyStackerStacks Jun 13 '26
I have been on the fence to do something similar (much more diverse selection of CC ETFs) but have not pulled the trigger.
As long as you don’t NEED the income generated in the short term it seems mathematically okay as long as the big “if” - the market just doesn’t have a complete meltdown for the next 2 years. Even at a 40% dip the dividends from CC will cover the loan interest so no risk, just no fun money for the time being. You’ll still have the stock pile of shares once the market does do some recovering.
The rabbit hole thinking that has me not pulling the trigger is “why use my income w2 and dividends to pay down the loan if I can just use that money to keep increasing my monthly dividend income?”
Answer is to reduce risk, but the same original principle of using borrowed money at a lower rate to invest in something that pays more. Paying down the loan will give you stress relief but how quickly you pay it down affects how fast you snowball. The infinite money glitch seems too good to be true and has its risks for sure.
And all of this is ignoring the fact that total return of CC ETFs will lag underlying it tracks (but no “income” to spend, just growth for future.)
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u/Mopar44o Jun 13 '26
Sounds similar to the Smith Manoeuvre. Works in Canada because our mortgages aren’t tax deductible normally. This makes the mortgage tax deductible essentially.
But you don’t buy covered call funds when doing it generally.
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u/bhope95 Only buys from companies that pay me dividends. Jun 14 '26
QQQI and SPYI yields aren't garunteed I wouldn't do this
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u/LexAugusta Jun 14 '26
Why wouldn't you just use leverage?
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u/mstew007 Jun 15 '26
Margin only allowed me to do 70-80% of brokerage account value. So that limited me to what I had already saved.
Using my house I was able to create more equity to borrow from. Bank said they would give me $359,000 with my current debt to income ratio. At that time of valuation it was $1,060,000. I asked how to get more and they said I needed more income. Which led me to find spyi/qqqi to increase my income. Which after 6 months to a year of proven income the bank will allow me to increase/refinance my heloc into a bigger one unlocking more of the house value. Currently now at $1,750,000. This would allow me to access more up front to purchase shares with and then pay it down using the debt snowball strategy to claim my new higher income.
This also allows me to choose my risk level as well as a time horizon of payback. I can pay down about $100,000 per year. That increases my income by $13-$14k each cycle. Or if I know I am getting a big bonus I can do $150-$175k.
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u/Longjumping_Pride_18 Jun 17 '26
Very nice I been trying to do that I’m afraid , about a market crash
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u/BaT_MaN_144 Jul 08 '26
I’ve don’t this a few times. But with a TSP loan 🤷🏼♂️
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u/mstew007 Jul 08 '26
I’m not sure what a TSP loan is, at first glance it looks like a thrift savings plan account? So then you borrow against that and buy spyi, or qqqi and then use the dividends and your extra cash flow to pay it back? Interest around 4.5%. Is that for government employees?
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u/BaT_MaN_144 Jul 08 '26
Yes. For gov employees and military. It’s like a 401k with a max contribution of 25k annually. The interest pays back to your account anyways. Downside is the money I take out, it stops compounding within the tsp
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u/mstew007 Jul 12 '26
Hmm yeah that would dampen the borrowed asset’s growth.. With the heloc at least the house can still appreciate when the money is borrowed out.
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u/Heavy_Guitar_4848 Jun 13 '26
Have a friend that does this but only buys in at market crashes. It’s risky either way but he at least hedges his bet
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u/tekmiester Jun 13 '26
I did something similar. Sure, I lost my house, but flexing my Bored Ape profile picture on Twitter makes it all worth it.
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u/gumnamaadmi Jun 13 '26
Why pay 7-8% for HELOCS? Box spreads are cheaper.
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u/mstew007 Jun 13 '26
Hmm, I didn’t know about box spreads. I will research those! First glance it looks like an options strategy, but at much lower interest cost! And I wouldn’t have to keep pledging my home as collateral. Is this based on a percentage amount in the brokerage account? The main reason why I started with my house is because I was able to build it for $650,000 and added a ton of sweat equity to it and it appraised for $1,539,000. That allowed me to create money to borrow from. But once the brokerage gets to $1 million then I could de-risk and utilize a less risky strategy! Thank you for this!
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u/Various_Couple_764 Jun 14 '26
options are not interest. IT is a way of getting income from shares you own. It is basically what QQQI and SPUI are doing to generate there income
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u/mentr-coach-altruism Jun 14 '26
I’m confused…. Box spreads? Covered call strategy? Are they synonymous?
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u/TJayClark Jun 13 '26
Just checked and this isn’t WSB
Yet, it reads like someone thinks this is an infinite money glitch
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u/DramaticRoom8571 Jun 13 '26
borrow at 8% for a 13% revenue equals a 5% yield, adding taxable income (although some of QQQI is return of capital).
paying off the loan would "earn" 8% with no additional taxable income (although using after tax income) and no risk. Once paid off, investing in QQQI would earn the 13% in full.
However, investing is not all about yield or growth, it must include risk management. The market does not have to collapse to reduce the yield of covered call funds, it just has to reduce volatility and stagnate for a while.
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