The Pros and Cons of Bridge Loans

Investing in real estate can be a complicated process, especially when you’re dealing with tight time constraints. You may have to close on a deal as fast as possible.  Or perhaps you don’t have access to conventional financing until after repairs or renovations are completed.  Stirling Capital Group may have the solution to your unique commercial loan challenge.  

This loan, called a bridge loan, can help speed up the closing of a transaction, sometimes closing in a couple of weeks.   A bridge loan is temporary and short-term. Its purpose is to bridge the transition from purchase to permanent financing.  

There are many ways a bridge loan can help secure an acquisition or renovation opportunity. Here are just a few ways bridge loans are beneficial:

  • Pre-approvals in as little as 3 days, Closings within 10 to 30 days
  • Interest only payment terms available
  • Great solution for property improvements or stabilization situation
  • Can help you acquire properties in need of CAPEX
  • The real estate value of the property typically serves as collateral for the Loan
  • A bridge Loan allows you to take advantage of an immediate opportunity

Using a bridge loan to acquire commercial real estate is common in many different building types.  For larger acquisitions, this includes:

  • Mixed-use
  • Office
  • Warehouse / industrial
  • Hospitality
  • Multifamily / Apartments (5 + units)
  • Self-Storage
  • Independent Living / Assisted Living

In addition, the independent real estate investor can take advantage of unexpected opportunities by using a Bridge Loan.  With rents on the rise across the nation, Fix and Flip and BRRRR investors leverage their portfolio by using quick close bridge loan products.  These products work in much the same way as the larger bridge loans.  The property and its value are the must important factor.  Bridge loans that include the renovation costs are used by the savvy real estate investors to close fast and begin renovations immediately.

Bridge loans are helpful in many situations, but in some cases, they’re not always ideal. Here are some of the drawbacks:

  • Compared to permanent loans, bridge loans tend to carry higher interest rates
  • A bridge loan’s term is usually between six and thirty-six months
  • You will need to secure permanent financing before the term of the bridge loan expires

Finding a Bridge Loan Lender

While several traditional commercial lenders offer bridge lending, they typically cannot react fast enough for the investor to take and vantage of those deals that require immediate execution. 

Stirling Capital Group has a wide range of private lending groups that offer bridge loans.  Our portfolio covers the one at a time real estate renovator to the large real estate company looking to add an income producing property to their portfolio.  Contact us today and we will help you close fast and acquire your next opportunity.