In the world of real estate investing, bridge loans are an incredibly valuable tool that often get overlooked. Investors commonly make use of bridge loans to acquire properties in the cases where a traditional loan isn’t a viable option. Bridge loans allow investors to better leverage themselves in the real estate market, and move on lucrative opportunities when they otherwise would not have been able to. If you’re an investor looking to finance a property but are struggling to secure funding from traditional lenders, a bridge loan may be the perfect solution for you. Continue reading to learn how you can use bridge loans to scale your real estate portfolio.
The basics of using bridge loans
Bridge loans are a form of short-term financing, typically issued from 6 to 24 months, that investors use to “bridge” gaps in their finances. Bridge loans differ from traditional financing options due to their short term nature. It makes them more suitable for time-sensitive deal scenarios, like with home flipping, but they also typically come with higher interest rates as a result. Bridge loans offer many benefits over traditional loans like a quicker application process, and flexible repayment options such as interest-only loans. They also typically have less stringent loan requirements for both the property and the credit history of the borrower.
How bridge loans can help scale your portfolio
As mentioned, bridge loans are often used by investors to purchase real estate properties when they cannot fund the deal with a traditional loan. One of the most common use cases for a bridge loan is when an investor has their funds tied up in a previous project, but they would also like to move forward with a lucrative investment opportunity. Under normal conditions, the investor simply wouldn’t be able to make this purchase. A bridge loan, however, allows the investor to jump on the opportunity and then repay the loan once they’ve completed the sale of their original property. For these more time-sensitive scenarios bridge loans will be the ideal solution, with funds being delivered in as little as two weeks after applying.
When it comes to financing fixer-uppers, you’ll find that bridge loans are incredibly useful here too. If you’ve ever tried to finance a renovation project with a traditional loan, you’ll know it isn’t always the smoothest process. Banks may not be willing to lend on a property that’s in rough shape, since they’ll likely deem it as too risky for their purposes. Bridge lenders, on the other hand, will often have loan programs specifically designed for flipping which cover the cost of renovations along with the acquisition cost of the investment. The short-term nature of the loans also make them better suited to flipping, where you will be offloading the property shortly after acquiring it.
Besides these scenarios, another time you will want to use a bridge loan is when you may not qualify for a loan from a traditional lender. Bank loans often come with strict credit requirements, but this becomes less of a factor when applying for a bridge loan. Instead, lenders will be more interested in the property you’re looking to acquire and whether it makes for a good investment. So long as you’re able to prove your ability to repay the loan, you are still likely to be approved it.
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 today to discuss your next real estate investment.