Bridge loans are a great investing tool that not enough people utilize in their real estate portfolios. Bridge loans are a form of short-term financing, generally used by experienced investors to acquire liquid capital while their typical sources of funding are tied up. They also have many other benefits that are less known to the common investor. When used properly, bridge loans are a great way to increase your leverage in the market and quickly grow your portfolio. If you have never considered a bridge loan for your investing needs, here are some of the benefits of using one.
Bridge loans are very flexible in the sense that they aren’t limited to one purpose. The most common use for a bridge loan is to place a contingency-free offer on a home while in the process of selling a different property. But they can also be used for a variety of other reasons as well. For example, you can take out a loan with the intention of renovating a property to increase its value. You can also use a bridge loan to pay off the expenses associated with a property before selling it and repaying the loan.
One of the greatest benefits of using bridge loans is how quickly they can be closed on, and the funds delivered. Bridge loans are known for having a much faster turnaround time when compared to traditional bank loans. If you work closely with your lender, funds can be delivered in as little as two weeks. This helps immensely for jumping on lucrative deals before they get snatched up by other buyers. Simply put, a private bridge loan is the fastest way to obtain funding in a time-sensitive deal scenario.
The short lifespan of bridge loans is also one of their greatest advantages. Most real estate loans are issued for a term of 15 or 30 years. Bridge loans on the other hand, are issued for shorter timeframes, usually from 6-12 months. This makes them ideal for scenarios where you will be reselling the home quickly, like with flipping or wholesaling. The other great benefit of their short-term nature is that many bridge loans are interest-only, which means that the faster you can pay the loan off the less you will owe in interest.
When you apply for a traditional loan, there is usually a lengthy process in which the bank or financial institution will be looking closely at you and your credit history. They will also have many questions to ask and hoops to jump through before you can get approved. If you have a less than stellar credit history, it can be very difficult to obtain financing from one of these lenders. You’re also likely to get denied if the property is in rough shape and you’re looking to invest in rehabbing it. This is not the case with bridge loans, however.
With a bridge loan, lenders will be more interested in the property itself and whether it makes a good investment. Bridge loans are usually secured by property you already own, which eliminates much of the risk on the lender’s side. That means your credit history will be less of a factor in the application process. It also means that homes which would not qualify for traditional financing can still be approved for a bridge loan. So long as the numbers make sense and you have a profitable business plan, you can obtain the funds needed to make your rehab project possible.
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.