4 Ways A Bridge Loan Can Help Expand Your Portfolio

Bridge Loans are a very valuable tool available at a real estate investor’s disposal, but not every investor makes good use of them. A bridge loan can be a great way to increase your position in the market by helping you rapidly acquire a property. They are also useful in situations where your funds may be tied up, like when you’re in the process of selling an owned property. Bridge loans have a few key differences from standard real estate loans, and you should know how they differentiate before you look to apply for one. Continue reading if you would like to learn more about bridge loans and how you can use one to expand your real estate portfolio.

Bridge loan basics

The main thing that separates bridge loans from typical bank loans is their short-term nature. Bridge loans are usually taken out for periods of 6-12 months as opposed to the 15 and 30-year options offered by banks. They are perfect for scenarios where you will be buying and selling a property quickly, such as with home with flipping. Bridge loans will generally be easier to qualify for and have less strict requirements than bank loans since they aren’t subject to the same federal regulations. To alleviate the risk on the part of the lender, most bridge loans are secured by owned property, such as another piece of real estate.

Using bridge loans to your advantage

When your funds are tied up

The most common use for a bridge loan is when you have found a property that you’d like to purchase, but your funds are tied up in other places. For example, you could be in the process of selling a property and need time to complete the closing, or you could be moving to a new area and need time to sell your old property in order to be able to fund the new one. Bridge loans are ideal for this scenario since they give you plenty of time to sort out your financial situation, and pay the loan back once the sale is completed. You can even post the property you are selling as collateral when applying for the loan.

When you need to close quickly

Another case where a bridge loan can be useful is when you have a time-sensitive deal that needs to be moved on right away. If you’ve come across a very lucrative opportunity and you want to beat others to the punch, it can be the quickest way to obtain financing for the deal. Bridge loans are known for their very fast turnaround time, and since they have less stringent requirements, they close faster than any other type of loan. If you’re willing to work closely with your lender, the entire process from first contact to funding can be completed in as little as two weeks.

When your property doesn’t meet bank loan criteria

There are certain types of properties that may have trouble being approved for financing by a traditional lender. If you’re looking to purchase a home that’s in need of heavy rehab, banks may view the investment as too risky and deny your application. For these situations you would be better off going with a bridge loan since they don’t have the same requirements. Bridge loans are also perfect for these situations because of their short-term nature.

When you may not qualify for traditional financing

The benefit of using bridge loans for your investing needs is how flexible they are. For instance, if you have less than stellar credit, you could be denied for a traditional loan by a bank. Your credit will be less of a factor when it comes to being approved for a bridge loan though. Private money lenders will be more interested in the property you are looking to finance and whether it makes a good investment. Many lenders also offer flexible payment schedules, such as interest-only options where you only pay the principal amount at the end of the loan term.

RCN Capital

Do you have a real estate project you would like to obtain financing for? RCN Capital lends to real estate professionals, commercial contractors, developers & small business owners across the nation. We provide short-term fix & flip financing, long-term rental financing, and new construction financing for real estate investors. If you are looking to acquire a Bridge Loan on a property, RCN Capital has competitive loan options available.Connect with us todayto discuss your next real estate investment.