Down Payment, The Key To Acquisition Loans
Before a developer or an investor can get a construction loan they need to purchase the property, or do they? If they do not have all the cash to purchase the property then they will need a loan to make up the difference between the purchase price and the cash they have to enable them to buy the investment.
DEVELOPERS SEEK THIS LOAN WHEN THERE IS A SHORTFALL IN THE PRICE
Like any smart investor the builder/developer wants to use as little of his own capital to preserve that for pre-development costs, usually known as the soft costs of the project, therefore the investor goes to the market seeking an interim loan
The builder will seek additional capital from either private investors or from a money center such as a bank, savings and loan or a credit union. That additional capital is known as an acquisition loans, which will be repaid from the construction loan. The construction loan then is the exit strategy for the payment of the loan the developer/builder used to purchase the property with.
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