There is a powerful tool available to investors that many don’t realize can be the perfect solution to your financing problems. Bridge loans are a form of short-term financing originally designed to help businesses bridge gaps in their liquidity. Today, real estate investors use them in a variety of ways to help them acquire properties, renovate neglected homes, and save stalled projects. Bridge loans are a great way for investors to inject quick cash into their projects and keep them moving forward. Interested in learning more? Here are 5 scenarios where a bridge loan can be the thing that saves your real estate deal.
One of the most common scenarios for using a bridge loan is when you are in the process of selling an existing property, but you have found another home you want to acquire on the open market. Normally, you would be stuck in a bind and have to wait until you have the available liquidity. Securing a bridge loan gives you the funding you need to close on the new property as well as some time to complete the sale of your previous home. This makes the property transition smoother, since all you have to do is repay the loan once you have the proceeds from the sale.
Another popular use for bridge loans is in the purchase of a fix-and-flip property. Bridge loans have a shorter loan period that ranges from 6 to 24 months, which is ideal for the lifeline of a home flip. And unlike traditional mortgage loans, bridge loans can provide you with additional funds to cover renovation costs on top of the acquisition of the property. Additionally, you may run into trouble securing a loan for a fix-and-flip project from a traditional lender, as they may view your rehab project as too risky. Private lenders who offer bridge financing understand the home flipping process, and will be more likely to approve you for a loan.
The problem with traditional financing is that the application process can take weeks or even months to complete before you get any answer on loan approval. Worse yet, there can be delays that make financing take even longer to come through. With certain types of real estate deals, like foreclosure auctions for example, you just don’t have that kind of time to wait. In contrast, the streamlined application process for a bridge loan is much faster, and more straightforward since the loan is secured by collateral. Your loan can be approved with funds delivered in as little as two weeks after submitting an application.
Bridge loans can be a lifeline for projects that have stalled as a result of financing issues. We already mentioned how bridge loans can be great for home flipping, and they can also be used to make updates to a property you already own. Making renovations to a rental property will allow you to boost its income potential which will give you the ability secure better long-term financing. Similarly, if you are in managing a renovation or construction project that has run out of funding, a bridge loan can be the cash injection your investment needs to keep going.
Bridge loans are also a great solution for those golden real estate opportunities that you know won’t last long on the open market. In today’s competitive real estate environment, speed is incredibly important, and you need a reliable source of financing that can be accessed quicky. A bridge loan can be approved in a matter of days which means you’re more likely to secure funding for a time-sensitive opportunity. Bridge lenders understand how important speed is in these scenarios, and can work with you secure financing faster so you can move on a lucrative deal.
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 finance an investment with a bridge loan, RCN Capital has competitive loan options available.