There are many different types of loans available for commercial real estate investors. A bridge loan turns out to be the best for a particular type of investment. You wouldn’t necessarily encounter this with single-residence real estate (basically, beginner real estate); but you’ll find that bridge loans serve an essential function when multifamily residences are the properties in question. Let’s figure out just how effective a bridge loan can be.
Understanding the Contents of a Bridge Loan
One of the chief attributes is flexibility. You usually want to employ such a loan when you are in a state of transition between investment properties and need cash to “spell you for a bit”. The bridge loan you take out can then function as the downpayment on another piece of property. Even while you’re holding on to the first. The interest rates span about 8%-11%. Which, although high, is necessary for it to be profitable to the lender. After all, you will be repaying the loan relatively quickly.
As pertains to commercial real estate acquisitions, a bridge loan can be of tremendous help in taking advantage of unexpected market flux. You have to be able to get in low so that you can of course later sell high. It is nearly impossible to secure a traditional commercial bank loan in the short length of time necessary to take advantage of such opportunities. Insofar as qualifying is concerned, the fact that you already possess a first mortgage on your current property makes qualification academic.
Best Times to Use a Bridge Loan
Pursue a bridge loan during a stable real estate market or when a commercial real estate opportunity arises and you lack the cash/credit. The property you currently possess is not saleable (or you don’t desire to sell it), but a great deal is in front of you. For more in-depth information on this and various other loan types, contact us at 18 Sierra Financial.