In the past, bridge loans were synonymous with consumer purchases, helping homebuyers leverage the equity in their current home for a down payment on a new property. However, stabilized bridge financing loan options have become a powerful tool for experienced real estate investors in recent years. Unfortunately, many investors might not be aware of how to utilize real estate bridge loans to unlock investment opportunities and growth potential.
Below, we’ll define and simplify stabilized bridge loan options. Then, provide short-term bridge loan investment examples for builders and landlords.
Below, we’ll define and simplify stabilized bridge loan options. Then, provide short-term bridge loan investment examples for builders and landlords.
What is a Bridge Loan?
A stabilized bridge loan, or bridge loan, is a short-term property loan designed to bridge a financial gap when funds are required but not yet available. As mentioned, bridge loans are commonly used within the consumer mortgage industry to help homeowners purchase a new home before their current property sells.
Through a bridge loan, a homeowner can use the equity built into their current home for the downpayment on a new property without selling the original property first. This provides ample time and peace of mind throughout the sale of a home.
Through a bridge loan, a homeowner can use the equity built into their current home for the downpayment on a new property without selling the original property first. This provides ample time and peace of mind throughout the sale of a home.
How Does a Bridge Loan Work for Builders & Landlords
For savvy investors, bridge loans have become invaluable tools within highly saturated real estate investment markets. These short-term financing vehicles have become a great way to grow and expand real estate investment portfolios for builders and landlords focused on:
- Single-family residential development
- Short- and long-term rental properties
- Multifamily rental units
With fewer requirements, more flexibility, and rapid financing, real estate bridge loan options provide the speed and agility investors need to outpace the competition and win in today’s markets. Additionally, with today’s changing markets and unpredictable interest rates, it’s never been a better time to utilize bridge financing fixed rates to secure, purchase, renovate, sell, or refinance a property.
Let’s look at some unique benefits of private equity bridge loans for builders and landlords:
Let’s look at some unique benefits of private equity bridge loans for builders and landlords:
- Fast & Accessible Options: Private financing provides investors more flexibility and fewer headaches than heavily regulated conventional lenders, like banks and credit unions. With less oversight and fewer bridge loan requirements, private lenders have more avenues to say “yes” and can approve and disperse bridge financing in a fraction of the time.
- Flexible Funding: When it comes to building a new property or taking on a long-term investment property that needs some work done, the reasons for financing are constantly evolving. Unlike other loans, stabilized bridge loan options can be designed to cover several unique needs in the market, including:
- Quickly purchasing a property
- Floating current long-term interest rates
- Holding or cashing-out while waiting for the sale of a property
- Stabilization before obtaining permanent financing
- Shorter Terms & No Prepayment Penalties: Bridge financing in real estate comes with shorter term lengths, typically between 12 to 18 months. Additionally, unlike conventional loans, bridge loan options come with no prepayment penalties–ideal for investors looking to capitalize on a long- or short-term investment property.
- Interest-Only Payment Options: Many private lenders offer interest-only payment options for investors. This means builders and landlords can defer payments on the principal balance and only make payments on the loan’s interest. This is ideal for investors looking to capitalize on a new opportunity when money is tied up in other assets.
Bridge Loan Examples for Builders & Landlords
Now that you have an understanding of what stabilized bridge financing is and who offers bridge loans, let’s look at some examples of how builders and landlords use bridge loans to optimize investment opportunities and portfolio growth:
Bridge Loans for Builders Example
Let’s say you purchase land to construct new single-family residences (SFR), and you want to build throughout the colder months to have the home ready to sell by summer. However, your build hits some snags and the delays extend its completion until the fall or winter months, which are slower months for homebuyers. Your property is completed, but may take longer than anticipated to sell and you need to move onto new projects soon.
To help kickstart new projects, a stabilized bridge loan through a private lender could be approved and financing dispersed in as little as 10 business days. The flexibility of the loan enables you to buy more time on the market for your already-completed build to sell, while keeping new investments on track. And once the build sells, you can easily pay off the bridge loan and still make a profit!
To help kickstart new projects, a stabilized bridge loan through a private lender could be approved and financing dispersed in as little as 10 business days. The flexibility of the loan enables you to buy more time on the market for your already-completed build to sell, while keeping new investments on track. And once the build sells, you can easily pay off the bridge loan and still make a profit!
Bridge Loan Options for Landlords
Bridge loans for long-term rental properties are more straightforward. While the goal for rental investors is to finance a property using a long-term DSCR rental loan, you may need additional capital upfront to purchase, renovate, and list your property.
In a highly competitive rental market, stabilized bridge loans provide long-term investors with immediate and adequate financing to successfully acquire, rehabilitate, and market a rental unit. Once the unit is listed or rented, you can refinance to a 15 or 30-year DSCR rental.
Landlords can also utilize bridge loans during longer vacancies–giving landlords the financial stability to find new tenants while income streams are halted.
In a highly competitive rental market, stabilized bridge loans provide long-term investors with immediate and adequate financing to successfully acquire, rehabilitate, and market a rental unit. Once the unit is listed or rented, you can refinance to a 15 or 30-year DSCR rental.
Landlords can also utilize bridge loans during longer vacancies–giving landlords the financial stability to find new tenants while income streams are halted.
Finding the Right Stabilized Bridge Loan Partner
The ultimate power of a bridge loan lies in its flexibility and ease. Finance of America Commercial (FACo) has been simplifying bridge loan options for real estate investors for over 11 years. And, with short-term fix and flip, new construction, and long-term single rental and rental portfolio financing options, we’re your one-stop shop for purchasing, building, rehabbing, refinancing, and profiting.
FACo’s Stabilized Bridge Loan options include:
FACo’s Stabilized Bridge Loan options include:
- Flexible term options from 12 to 18 months
- Several non-owner occupied property types, including:
- Attached or detached SFR
- 2-4 unit residential properties
- Townhomes
- Condos
- No-DSCR option available
Alongside FACo’s team of industry experts, our stabilized bridge loan options provide the short-term funding you need to bridge financial gaps before refinancing or selling your investment property. Whether you’re leveraging bridge financing for a home purchase and renovation, new build, or long-term rental, we have the tools, resources, and lending flexibility to meet your investment needs.
If you’re ready to optimize your real estate portfolio through smart bridge loan financing, let our team of industry experts help guide you to investment success. CLICK HERE to schedule a FREE consultation today.
If you’re ready to optimize your real estate portfolio through smart bridge loan financing, let our team of industry experts help guide you to investment success. CLICK HERE to schedule a FREE consultation today.
