Bridge Loans: Filling In the Gaps in Financing
Getting the financing you need when you need it can be one of the biggest challenges of being a successful real estate investor, regardless of whether your niche is fix and flips or commercial real estate. There are many options out there to get you your money faster, but perhaps none as reliable and low-risk as bridge loans. These loans are designed specifically for the purpose of getting you the cash you need right away, and can help make any sudden investment opportunity yours in no time with less stress.
How Do These Loans Work?
When a sudden investment opportunity arises, getting the loan you need can take weeks or even months, meaning you’ll likely miss out to other interested parties that might already have the cash on hand. Bridge loans can be obtained within a week in most cases, and get you the cash you need to make the property yours. However, because they’re meant to be short-term solutions until you obtain a more permanent financing solution, their interest rates are higher. Most loans of this variety are designed to only last between two weeks and three years for this reason.
The main benefit of bridge loans is just what you’d expect. They get you the cash you need, fast. This means they you won’t be missing out on awesome opportunities simply because your lender is taking too long, which in turn helps you to maximize your profits in the coming years. This is also an excellent way to begin diversifying your investment portfolio overall, as you’ll have more money at your fingertips as various opportunities arise.
Unlike many other loans, these particular loans are designed to be short-term solution, and therefore offer no prepayment penalties if you want to pay the loan off before the final deadline. If you receive one of these loans immediately and then obtain more substantial permanent funding down the road, you can go ahead and pay this loan off so you won’t have to worry about maintaining two different payments each month, which can quickly eat into your profits.
Finally, in most cases, these loans are fairly simple to qualify for. However, it’s crucial to keep in mind that these are, in the end, temporary solutions, and should not be taken on lightly even if you qualify for the loan, because if you fail to qualify for other funding you could be in financial trouble.
Bridge loans can be a huge help to lenders everywhere, especially those who are new to the real estate investment world. Speak to your professional about getting a loan of your own to secure your next big purchase.