Bridge loans maintain a high degree of popularity in certain real estate markets. As to whether or not they’re the right decision for your needs, you’ll need to evaluate several factors. Most buyers take out these types of loans to purchase another property before the existing one has been sold.
With that in mind, a bridge loan is a temporary loan that “bridges the gap” between a buyer’s new mortgage and the sales price of the new investment property, in case the existing investment property has yet to be sold. These loans are tied to and secured by the existing commercial property or multifamily investment and their guidelines tend to vary based on the lender. While the whole “buying a second property before selling first” scenario is common in bridge loans, there are additional reasons where a bridge loan can provide a worthwhile solution:
- Buying property at an auction.
- Developing/refurbishing property before full capital is available.
- Developing an uninhabitable property (when a mortgage is unavailable).
- Short-term working capital for a business.
- Covering short-term cash flow issues or transaction deadlines.
- Financing unexpected tax liabilities.
- Purchasing land/property before planning permission or a lease extension.
- Borrowing against a property’s value as opposed to its purchase price.
- When interest must be deducted without repayment of the loan.
Give us a call and we’ll be happy to help you figure out whether a bridge loan is right for you.
This update is provided to you by Park West Capital. We have over a decade of experience specializing in real estate financing and commercial lending opportunities. We have assisted numerous clients with growing their real estate portfolios and providing the funding resources. We firmly believe in accountability, excellence, integrity, entrepreneurship, and teamwork. Contact us at 888.808.9417 to learn more about how we can professionally assist you with your investing needs or fill out our hard money loan application and we’ll get in touch with you.