Real Estate Financing Using a Securities-Based Line of Credit
While we continue to experience one of the worst downturns in the real estate markets in recent history, the need for liquidity and adequate funding sources remains a major obstacle for real estate investors. Strict guidelines imposed by most lenders have prevented most investors from expanding their real estate portfolios. Some of those guidelines are: restrictions on the number of financed properties one may have, lower loan-to-values, more stringent debt-to-income ratios and the requirement to provide verifiable income and asset reserves. In this volatile lending environment, many have resorted to liquidating their securities portfolios (stocks, bonds, mutual funds, etc.) to leverage the working capital needed to make those investments.
Rather than selling off one asset to purchase another, Covenant Financial Group is giving these same investors the opportunity to leverage their portfolios with a Securities Based Line of Credit (SBLOC) giving the investors the ability to acquire their real estate and stay in the market at the same time. Leveraging vs. selling enables the investor to continue to receive dividends, profit from future upside growth and maintain a diverse portfolio that provides protection against a downturn in either market.
Unlike a traditional mortgage, a Securities Based Line of Credit (SBLOC) is based on the strength of the securities portfolio as opposed to the strength of the borrower’s credit, source of income or the type of property being financed. This “Limited Doc” loan means less paperwork, faster approvals and because it is structured as a line of credit, immediate access to cash when it’s essential.
Securities Based Lines of Credit (SBLOC) can be used for a wide variety of purposes within a Real Estate transaction, including but not limited to :
- Generating or increasing down payments
- Outright purchase of real estate
- Paying down existing mortgages
- Covering hard costs of real estate investments
- Temporary or “Bridge” financing
- REO, rehab or fixed and flip loans
