A bridge loan is a popular way for investors to financially leverage themselves while in the process of selling a property and buying another one. This is the most common use for a bridge loan in real estate, however, there are many reasons why an investor might choose to use one. When should you use a bridge loan? Continue reading to learn when to leverage one in your real estate portfolio.
Why Choose a Bridge Loan?
Why should you choose a bridge loan over other forms of financing? It’s simple: bridge loans give you the flexibility to acquire funding fast while in the process of selling another property. An aggressive investor aims to find new opportunities even while waiting for their current properties to sell; the only problem is liquidating enough cash for the next down payment. This is where a bridge loan comes in handy, you can make your next big move in the market while waiting for your previous project to sell.
With an adaptable repayment schedule and zero contingencies, many investors leverage themselves using bridge loans when demand is high and they need to stay competitive in the market. A seller prefers a bridge loan for its fast approval rates and lack of contingencies, making it perfect to use for a cash offer on a property.
When to Use a Bridge Loan
Do you know when the best time to use a bridge loan is? Continue reading to find out when you should use one.
When you’re in the middle of selling a property but want to purchase another one, it can be difficult to round up enough liquid cash to secure a down payment on the next property. Many investors and homeowners take advantage of bridge loans for their flexibility for funding a new property while still in the process of selling another one. A bridge loan “bridges the gap” in your funds, opening up the door to more opportunities in the market.
If you’re relocating for work or personal reasons, it can be difficult to acquire fast-funding if you rely on your current property to bring you revenue. For those who are relocating, they often times use bridge loans to fund their relocation while they wait for their old property to sell. Bridge loans are best for those relocating on a whim, considering you can acquire funding in as little as a few days. You shouldn’t have to wait months for your funding to be approved, a bridge loan gets funds in your hands just as fast as your life moves.
Business Property Acquisitions
When large and mid-sized businesses and corporations need to acquire funding for a property to expand their operations, they can use a bridge loan as an essential aid to leverage themselves in the real estate market. Using a bridge loan, these business entities can purchase attractive properties on the market without waiting to secure long-term financing. A bridge loan allows your business to keep up with operational expansion, regardless of how fast you scale-up.
Reoccurring Business Expenses
In certain sectors like sales and consultation, companies often use bridge loans to “bridge the gap” in financing while waiting for clients to pay for services rendered. While waiting for clients to pay for their services, businesses still have to pay their monthly bills and restock their inventory. A bridge loan is often used to finance these activities, even when your accounts payable is higher than you’d like it to be. Bridge loans offer immediate funding for necessary business functions, helping to keep your business growing in the right direction.
RCN Capital offers short-term and long-term financing options for real estate investors. Whether you are looking to fix & flip properties or hold properties for rental income, RCN has flexible options that are suited to your needs. Connect with us today to discuss your next real estate investment.