Why Real Estate Investors Should Work with Bridge Loans?
Looking to invest in real estate and are not sure which loan program to choose from? Check out bridge loans!
Bridge loans are widely used by some of the most successful real estate entrepreneurs. They help borrowers purchase multiple investment properties and build a prolific portfolio. Generally speaking and in consequence, the majority of real estate investors are well versed in the private lending industry and have built their whole careers off of the benefits of bridge loans. Through their experience, real estate investors are able to grow their wealth substantially with the aid of a private money lender. Unlike a bank, private money lenders can provide guidance to real estate investors on top of a quality, well-informed bridge loan.
What are bridge loans specifically? Bridge loans are an asset-based loan to which a borrower obtains from a private lender. They are backed by an asset, typically the property you are invested in, and are used as collateral so as to ensure security with the lender.
Bridge loans are especially advantageous for first-timers as they have a quick approval process with little underwriting, which can give you an early competitive advantage. Bridge loans are also short-term loans, lasting roughly 12-24 months, so there is a quick turnaround for your investments. Because of the benefits that come in the form of quick approvals and turnarounds, bridge loans generally have higher interest rates. This is also in part because with less underwriting, lenders have a lessened sense of security with their loans and require a bigger rate to counteract it. Therefore, from a financial standpoint, bridge loans are a bit riskier than alternative loans; however, they are the best fit loan program for real estate investors looking to grow their equity through flipping houses.
Bridge loans can come in many forms based on what property you have or what strategy you hope to implement. However, they can be applied to most any property. Some of the commonly used ones are commercial properties, multi-family, and 1-4 family. Overall, bridge loans are typically asset-based and under the realm of hard money. Hard money relates to the risk and security of the bridge loan as a large amount of money is given in proportion to the property’s current and expected market value. Because of the high interest rates and volatility of the real estate market, bridge loans, as hard money loans, are under strict guidance by their lenders as they want to ensure that their money is being invested wisely. This is also in part because there is not much room for error or time for the overall project to evolve.
As a short-term, asset-backed loan, bridge loans are specifically aimed at investors looking to make quick marginal gains in real estate properties and their market value. It can be used for multiple properties at a time and it can be repeated after a project is complete. Bridge loans are risky but fairly reliable for real estate entrepreneurs as they can be implemented almost anywhere, barring market volatilities and fees based on regions and localities. As an investor, you can acquire multiple bridge loans for multiple properties over a period of time with a private lender to which you can develop a strong, reliable relationship with as they help expand your entrepreneurial possibilities and grow your equity.
Bridge loans are not just for experienced professionals, they can also be used by first-timers looking to get their start in the real estate industry. Because most private money lenders have expert knowledge and experience within the real estate industry and because bridge loans are well-established within the real estate entrepreneurial community, anyone interested in real estate investing has the potential to use a bridge loan to get their start. This also helps bring down the barrier-to-entry for the real estate investment industry as it becomes easier to get involved. Therefore, the application process is quite simple and only requires the minimum necessary information. No tax forms or credit history here, simply the location and address of the property, purchase and expected appraisal value, and type of property.
When applying for a bridge loan, all a private lender needs is the very basic sense of the property and plan that you have to invest in it. It is really that simple to apply and the approval process coincides with that simplicity too with its quick and efficient response time.
Looking to fund your investment property? Book now to speak with a professional about applying for a Bridge Loan at Kings of Capital!