Bridge loans are very common with a variety of applications. Consumers use them when they are in a transitional phase and need to bridge the gap between the sale of an old home and the purchase of a new one. So they are most commonly used by homeowners when they are ready to buy a new home, but their existing home hasn’t yet been sold. In a sense, you are borrowing money for a down payment on a new house before your old one is sold. Commercial real estate investors and developers use bridge loans when they reposition a property or have a clear path to permanent financing but need some temporary funds for acquisition or development. In all cases, bridge loans are a temporary loan that is secured by a current piece of property.
Bridge Loans for Real Estate Investors
Bridge loans are also commonly used by real estate investors who are ready to purchase a fix and flip home. Getting a bridge loan allows an investor to promptly execute a sale on a home that they know they can fix up and sell very quickly. These are one type of hard money loan and are one of the ways real estate investors can complete more fix and flips at one to scale their business and build a portfolio.
Benefits of Hard Money and Bridge Loans
If you would rather take out a smaller cash stake in your next project or if you have cash or liquidity limitations, a bridge loan or hard money loan may be right for you. It gives you enough money to get started and will be paid off once the project is done, either by selling the home, or by getting a renter and turning it into a cash-producing asset and thereby qualifying for a traditional loan. You may also benefit from a bridge loan if you are working toward scaling your business by taking on multiple fix and flip projects simultaneously. Bridge and hard money loans typically take less time to close than other loans, and you may find yourself closing on one home before you sell the next, or you can decide to flip several homes at once. What are the other benefits of a bridge loan?
Bridge and hard money loans provide more flexibility and adaptability than other long term loans. With this type of financing, investors aren’t committed to the imminent sale of the assets they acquire, or long term holds. Instead, they can treat each asset independently and create the most successful exit strategy that fits their need and budget.
More Available Cash and Volume of Acquisitions
It is challenging and not usually realistic to support a large volume of acquisitions when you are purchasing with cash out of your own pocket which could limit you to only buying one or two properties at a time. But if you utilize a bridge loan, you can make your dollars go further and get cash quickly to make your next purchase.
Timing and Opportunity
As a real estate investor, there is a chance you will come across the perfect investment opportunity when you least expect it. You don’t want to have to shop around for financing and waste valuable time. If you’ve been an investor long, you know that good opportunities get bought up rather quickly, so the faster you can secure financing, the better. By finding a lender that you build trust with, you can create a scenario where you can request the right type of bridge or hard money loan and receive approval quicker than the next guy who decides to shop around for the best rates.
Ready to Make Your Next Real Estate Investment?
Choosing a bridge or hard money loan is an excellent way to secure your next investment quickly. Boomerang Capital is quick and dependable and we are ready to help you execute fast so you can turn your next opportunity into a profitable reality. We’ve been consistently making bridge and hard money loans for over 10 years and our lenders have done multiple projects themselves. Contact us to discuss a bridge or hard money loan today!