Is a bridge loan the right choice for you? Here’s a few reasons why every real estate investor should consider a bridge loan when exploring their lending options.
Seize More Investment Opportunities
If you’re in the process of selling a property, it can be difficult to allocate new capital to put towards other opportunities in the market. A bridge loan allows you to seize more investment opportunities by giving you a source of capital when you need it most. A bridge loan ‘bridges the gap’ in liquidity while you wait to sell your existing property. When there is a new, worthy investment in the market that is time sensitive, the decision to obtain a bridge loan could make or break your opportunity. Without a bridge loan, you would have otherwise had to skip time sensitive opportunities due to a lack of capital.
Flexible and Adaptable Loan Structure
Bridge loans provide flexible and adaptable loan structures compared to other types of real estate financing. Although there are specific qualifications that are unique to bridge loans, the qualifications can be flexible as many lenders who provide bridge loans do not have to adhere to the same regulations as traditional financial institutions. Having good credit and sufficient income is important when applying for a bridge loan, but since the loan is backed by the equity in your property, you can expect more flexibility regarding loan structure.
Preferred by Sellers
In a seller’s market, you need to keep yourself competitive. A bridge loan leverages you when placing bids on a property because a seller will prefer a buyer that uses a bridge loan since it can eliminate any contingencies on your offer. A seller wants to choose the best offer that allows them to offload their property the fastest way possible, a buyer who uses a bridge loan is approved in as little as one to two weeks, which is an attractive option for a seller.
Alignment with Your Exit Strategy
A bridge loan is fairly easy to align with your exit strategy, considering there are many avenues an investor could take to exit an investment when using a bridge loan. The most common exit strategies investors use include refinancing with a conventional mortgage or selling the asset. Every savvy investor has an exit strategy they can fall back on, a bridge loan creates strategic flexibility that other loans cannot replicate.
Payoff Your Loan at Any Time
When you chose to use a bridge loan, many lenders will allow you to pay off your loan at any time with no fee. As you research which loan is right for your investment style, you may notice that long-term loans always have early repayment penalties. When you use a bridge loan, these loans generally have little to no fee for paying them off early since they are due in 6-12 months.
Bridge loans offer the ability to make interest only payments with the principal amount being paid at maturity. This can be very useful for an investor who needs smaller monthly payments to allocate capital towards another venture. Since you’re borrowing capital with the equity of your own property, lenders will have more flexible payment options knowing they have collateral even if you default on your loan.
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.