By Fred Matera, CIO, Redwood Trust A lack of affordability will lead to near-term weakness,…
An Acquisition Line of Credit is a Smart Investment Tool
As a real estate investor, having multiple sources of capital at your disposal is a essential element of your ability to acquire new properties. Most investors have several traditional sources at their disposal, including:
- Conventional mortgages
- Owner financing
- Hard money loans
- Private money
- Self-directed IRA funds
- Home equity lines of credit
One relatively new and growing-in-popularity popular method for obtaining properties or a portfolio of properties is an acquisition line of credit. This financing option can be used to acquire and grow an investor’s rental portfolio or it can be used to fix and flip properties. Ultimately the access to capital will enhance an investor’s ability to complete deals.
Traditionally, borrowers obtain real estate lines of credit based on the equity in the properties they currently own. However, that is no longer the case. Acquisition lines of credit can now be obtained based on an applicant’s profile as an investor and financial wherewithal. No longer is the equity in your existing portfolio needed to acquire a line of credit that will enable you to rapidly grow the size of your business. You can be underwritten and approved as a sponsor based on your demonstrated track record and financial strength to obtain an acquisition line of credit in as few as three weeks in amounts ranging from $1 million up to $50 million.
Once obtained, an acquisition line of credit can be drawn upon with the simple presentation of an executed purchase contract and closed in as few as seven to 10 days. The line can be drawn upon multiple times which means that an investor can invest in multiple properties with the same line of credit. Mortgage payments are interest only and based on the outstanding loan balance – you only pay for what you use.
A major advantage of obtaining an acquisition line of credit is that there are no prepayment penalties or early exit fees. Additionally, the interest rate, origination fees and other transaction costs are substantially lower than a traditional hard money lender.
A typical real estate investors will run out of capital before they run out of buying opportunities. Having an acquisition line of credit provides the needed access to capital to execute deals and take your real estate business to the next level. No more wondering if you are going to get approved for your next transaction.
There are tremendous investment opportunities available in the marketplace and an acquisition line of credit provides investors with the financial capacity to quickly close on a property and the flexibility to optimize their real estate investment strategy.
This powerful financing option can be obtained through Colony American Finance, a national private specialty lender that focuses on providing financial solutions to non-owner occupied real estate investors. CAF provides investors with acquisition lines of credit starting at $1 million to enable them to fix and flip a property or increase the number of properties they own. Obtaining an acquisition line of credit is a relatively straightforward process.
Colony American Finance is a leading provider of financing solutions to residential real estate investors. We provide attractive long term debt products for stabilized rental portfolios as well as credit lines for new acquisitions. Colony American Finance offers blanket first mortgage financing secured by portfolios of five or more assets consisting of single family homes, duplexes, triplexes, quads, condos, townhomes and apartment buildings containing up to 20 units. Our Term Loan can be used to recapitalize existing portfolios (cash out refinance) or to acquire additional assets.