Florida Real Estate Broker ExaminationReal Estate Finance and InvestmentHard
A Florida investor owns a portfolio of commercial properties and wants to leverage their equity to purchase another investment property without selling their existing assets. They are considering a loan that is secured by the equity in multiple properties within their portfolio. What type of loan would best suit this strategy?
- AHard money loan
- BBridge loan
- CPortfolio loan
- DConstruction loan
Show answer & explanationAnswer & explanation
Correct answer: C. Portfolio loan
A portfolio loan is a type of loan where a lender holds the loan in its own portfolio rather than selling it on the secondary market. In this context, it refers to a loan secured by a portfolio of properties, allowing an investor to leverage multiple assets to finance a new purchase without selling existing ones.
Why the other options are wrong
- A. A hard money loan is a short-term loan based primarily on asset value rather than borrower credit, usually at a higher interest rate, not specifically for leveraging a portfolio.
- B. A bridge loan is a short-term loan used to 'bridge' the gap between buying a new property and selling an old one, not typically secured by an entire portfolio.
- D. A construction loan is for financing the building of a new structure, not leveraging existing equity across multiple properties.
Portfolio Loan
A portfolio loan is a mortgage loan that a lender originates and then holds in its own investment portfolio rather than selling it on the secondary market. It can also refer to a loan secured by multiple properties within an investor's portfolio.
- Lender keeps the loan, doesn't sell to secondary market.
- Often offers more flexible terms for unique situations.
- Can be used to leverage equity across multiple properties.
Memory trick: A 'Portfolio' loan keeps it all in one 'Basket'.