There are still not enough investors utilizing bridge loans in real estate. Bridge loans are a powerful tool that unlocks new opportunities for real estate investors, giving them fast access to funding and the ability to fund more deals. They can be used for a wide range of property types and are easier to qualify for than traditional loans. They can also be the one key thing that takes your investment portfolio to the next level. Have you been considering using a bridge loan for your next real estate project? Continue reading as we cover the basics of bridge loans and how you can use them to elevate your real estate game.
A bridge loan is a form of short-term financing provided by a private lender as opposed to a traditional lender like a bank or credit union. Bridge loans are known for being a fast-financing solution with a shorter loan term of 6 to 24 months. They are secured by collateral, which is often the property being financed, and this also gives them some added flexibility. Loan approval is determined by the property you’re looking to acquire and whether it makes for a sound investment. Your income and personal credit history are less of a factor.
As mentioned, bridge loans are known for their speed and flexibility. When working closely with your chosen lender, a loan can be approved with funds delivered in as little as two weeks. This gives investors the ability to move on time-sensitive real estate opportunities, even if their funds are tied up in other investments at the time. Bridge loans can also fund a wider range of investments such as fix and flip properties, and they are able to provide additional funds to cover renovations on top of acquisition costs.
There are several ways investors can make use of bridge loans to supercharge their portfolios. Along with giving investors access to quick funding to seize time-sensitive opportunities, they are an ideal solution for home flips. Their flexibility allows them to be used for funding a variety of deals, even on properties you already own. For example, you can use a bridge loan to make upgrades to an older multifamily home, increasing its monthly income and giving you the ability to secure long-term financing. You can also make use of the equity you have in existing properties to obtain a bridge loan, in a strategy similar to utilizing a HELOC.
Bridge loans are only as effective as the scenario you’re planning to use them for. It will be important to evaluate your investment’s needs and determine if a bridge loan will make for a good solution. Bridge loans are incredibly effective for funding short-term deals, but they also typically come with higher interest rates than traditional loans, and those costs tend to add up the longer your deal takes to finish.
It will also be crucial that you have an exit strategy in place when using this type of loan. Whether it’s selling the property or obtaining permanent financing, be sure that you are ready to pursue it before the loan period ends. It may also be a good idea to have a contingency plan in case your first method doesn’t go as you planned.
The lending partner you choose to work with can have a significant impact on the success of your investment. Of course, you will want to compare various loan programs in order to find the best fit, but you should also consider the reputability of your lender. A quality bridge loan provider will have a proven track record of delivering financing and a history of funding real estate deals. Look into customer reviews and the quality of their customer service, since these things can become a priority if you run into any financing issues. The sign of a good lender is one that can provide you with additional services, such as resources or connections in the real estate space to help you find success your project.
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.