Tag Archive for: bridge loans in 2022

If you’re an investor, here’s how the current real estate market is impacting bridge loans for you.

Federal interest rates keep rising, tightening up money across the country for real estate investors.

The entire real estate market is feeling the squeeze of rates. Many fix-and-flips on the market now were purchased in a different market. Investors may have expected to get top-dollar for houses that now may take weeks or months to sell at all.

The Market Changes & Bridge Loans

Firstly, what changes have already occurred, and what can we expect going forward for bridge loans?

In general, you can expect the following changes from real estate leverage lenders:

  • Lower LTVs – The amount of money you can get from a lender will continue to go down.
  • Cutting Appraisals Lenders expect a 5% to 15% decrease in market prices, and appraisals will begin to reflect that.
  • Shortened Terms – The length of bridge loans or some lenders will be cut in half.
  • Credit Score – While a 620 credit score used to be the minimum, now lenders won’t consider applicants with less than a 680.
  • Pricing – Six to eight months ago, you could get a bridge loan at a 7% to 8% interest rate. Now, they’re around 10% or 11%.

Just as you might feel some uncertainty in these economic times, lenders feel it too. Lending institutions want to keep themselves safe. Unfortunately for real estate investors, that means tight money in this real estate market is impacting bridge loans.

Why Bridge Loans are Needed

Secondly, these market conditions increase the demand for bridge loans. Homes may be staying on the market longer, but lenders still need their loans paid back on time, and you still need to move on to your next project.

Now is the time to set yourself up well financially. Due to tightened conditions now, the market 6 months from now will have a lot of great deals for investors. Bridge loans can help you get ready.

With a bridge loan, you can free up the capital you have in houses on the market. Plus, you can improve your relationship with lenders by paying off your flip loan.

You can put your flipped house into a short-term bridge loan for 2 to 3 years. In the meantime, you could rent out the property, or just use the loan to pay off the lender while waiting for a buyer.

Using bridge loans in this way keeps you from foreclosure or other negative effects on your credit.

Who Does Bridge Loans Right Now?

Lastly, the following places are still lending:

  • Small to mid-size banks
  • Lenders that work with capital funds or hedge funds
  • Small lenders, like The Cash Flow Company
  • Some hard money lenders

The catch is they’ve all tightened their funds.

You can get a bridge loan from these places. You’ll just get lower LTVs, higher rates, and need a better credit score.

In this market, it’s important to reach out to any lender who can help you. Nothing will fall into your lap – you’ll have to actively search to find a loan product to fit your bridge needs.

You can also work with a place like The Cash Flow Company, who always searches for the best real estate loans available.

Read the full article here.

Watch the video here:

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What are your options when a past project is stuck on the market? Here’s how to use a bridge loan to buy a new property.

Gone will be the days of fix-and-flips selling within hours. 

In this new market, real estate investors need to prepare for the possibility of their projects staying on the market for quite a while.

To avoid a full standstill in your real estate investment career, you have to know how a bridge loan can help you buy a new property.

Buy a New Property with a Bridge Loan in 2022

Instead of selling in two to three days, we’ll soon see houses taking two to three months to sell, depending on size and location.

Your investment career can’t come to a halt just because a house takes too long to sell. What if you find a great deal while your old project is still on the market? All your capital is tied up in that first property.

Bridge loans solve this problem.

A bridge loan puts a lien on both the new property and the old property. This gives you the equity needed to close on a new house before the money from selling the old one hits your pocket.

Using a bridge loan to buy a new property is the number one use of bridge loans.

What to Look For In a Bridge Loan

Bridge loans are all about getting the right lender and the right position.

Terms of a Bridge Loan to Buy a New Property

It’s important to pay attention to the terms of a bridge loan. You want a lender who charges fewer points – even if their interest rate is higher.

You only have to pay interest in small, monthly chunks. With points, you have to pay a percentage of the whole loan. Since bridge loans are very short-term, you won’t end up paying much in interest anyway. However, you’ll still have to pay the points (regardless of how long you kept the loan).

Shop Around for Lenders

Make sure you shop around for the right lender for your bridge loan. Find out who does bridge loans, who can do them quickly, and who focuses more on the interest rate rather than other costs (originations, appraisals, etc.).

Bridge loans are meant to be quick, short-term, and relatively inexpensive. You want to find a lender who can provide that.

Read the full article on bridge loans here.

Watch the video here:

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What Is a Bridge Loan?

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How do real estate investors use these short term loans? What is a bridge loan?

A bridge loan is a very short-term loan – even shorter than the typical hard money loan. It’s used in real estate investing to fill any gaps left by a lack of funding. 

Most popularly, these loans help you bridge the space between one project and another.

Let’s say you’re just finishing up a flip. The house is on the market, buyers are showing interest, and now you’d like to get another property bought so you can jump right in to your next flip.

A true bridge loan covers up that gap between projects. You get the money to close on a new property before the first one is completely sold. A bridge loan lets you overlap from an old project to a new one.

When to Use a Bridge Loan

Real estate investors use bridge loans for all kinds of situations:

  • When you’re buying a new property and already have one listed for sale
  • When you need to cover down payment on a new property
  • When you find a great deal but your bank’s financing won’t be ready in time
  • When a wholesaler waits for a buyer’s money to come into the title company
  • When a hard money or traditional loan leaves gaps in a project
  • When you need to refinance a hard money loan.


Read the full article on bridge loans here.

Watch the video here:

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Everything you need to know about bridge loans right now in the current market.

The demand for bridge loans is up in the real estate investment community. Yet the availability of loans is decreasing every day.

Why is this? Who is still lending?  What are the current costs? And how do you find these lenders?

Let’s dive in.

Why the Real Estate Market Has Changed

Federal interest rates keep rising, tightening up money across the country for real estate investors.

The entire real estate market is feeling the squeeze of rates. Many fix-and-flips on the market now were purchased in a different market. Investors may have expected to get top-dollar for houses that now may take weeks or months to sell at all.

The Market Changes & Bridge Loans

What changes have already occurred, and what can we expect going forward for bridge loans?

In general, you can expect the following changes from real estate leverage lenders:

  • Lower LTVs – The amount of money you can get from a lender will continue to go down.
  • Cutting Appraisals Lenders expect a 5% to 15% decrease in market prices, and appraisals will begin to reflect that.
  • Shortened Terms – The length of bridge loans or some lenders will be cut in half.
  • Credit Score – While a 620 credit score used to be the minimum, now lenders won’t consider applicants with less than a 680.
  • Pricing – Six to eight months ago, you could get a bridge loan at a 7% to 8% interest rate. Presently, they’re around 10% or 11%.

Just as you might feel some uncertainty in these economic times, lenders feel it too. Lending institutions want to keep themselves safe. Unfortunately for real estate investors, that means tight money – including bridge loans.

Why Bridge Loans are Needed

These market conditions increase the demand for bridge loans. Homes may be staying on the market longer, but lenders still need their loans paid back on time, and you still need to move on to your next project.

Now is the time to set yourself up well financially. Due to tightened conditions now, the market 6 months from now will have a lot of great deals for investors. Bridge loans can help you get ready.

With a bridge loan, you can free up the capital you have in houses on the market. Plus, you can improve your relationship with lenders by paying off your flip loan.

You can put your flipped house into a short-term bridge loan for 2 to 3 years. In the meantime, you could rent out the property, or just use the loan to pay off the lender while waiting for a buyer.

Using bridge loans in this way keeps you from foreclosure or other negative effects on your credit.

Who Does Bridge Loans Right Now?

The following places are still lending:

  • Small to mid-size banks
  • Lenders that work with capital funds or hedge funds
  • Small lenders, like The Cash Flow Company
  • Some hard money lenders

The catch is they’ve all tightened their funds.

You can get a bridge loan from these places. You’ll just get lower LTVs, higher rates, and need a better credit score.

In this market, it’s important to reach out to any lender who can help you. Nothing will fall into your lap – you’ll have to actively search to find a loan product to fit your bridge needs.

You can also work with a place like The Cash Flow Company, who always searches for the best real estate loans available.

What Is the Cost of Bridge Loans Right Now?

There are 3 main types of bridge loan lenders: banks, capital funds/hedge funds, and local hard money lenders. 

But the market has changed. Here’s a glimpse into what you can expect for the next few months:

Rates

Banks – Interest rates average around 6% to 6.5% for banks.

Capital Funds – Expect 10% to 12% interest rates for hedge fund bridge loans right now.

Hard Money – Hard money interest rates are about the same as cap funds, around 10% to 12%, but with a bit more flexibility.

Points

Banks – Banks have the cheapest money, at 1 to 1.5 points. Smaller banks tend to charge more in origination fees than national banks.

Capital Funds – Cap funds charge around 2 to 3 points.

Hard Money – You can expect 2 to 4 points on a hard money bridge loan transaction.

LTVs

Banks – Depending on your relationship with the bank, you can get up to  65% to 70% LTV on a bridge loan.

Capital Funds – You can get 65% LTV on a refinance or bridge loan with a hedge fund.

Hard Money – Hard money has the most LTV flexibility, like putting a cross-lien on other properties. Typical LTV range is 70% to 75%.

Terms of Bridge Loans

Banks – For bridge loans, banks have the most flexible, longest terms, from 1 to 3 years.

Capital Funds – For cap funds, 3-year bridge loans are now two. Two-year bridge loans are now one.

Hard Money – Bridge loans from hard money have the shortest terms – as short as 1 month, and typically no longer than 1 year.

Closing Times

Banks – Banks’ lead time for a bridge loan is typically 3 to 6 weeks. But lately, we’ve seen loans take up to a couple months in the current market.

Capital Funds – The standard closing time for cap funds is 2 to 3 weeks.

Hard Money – Hard money can close fastest – which is very important for a bridge loan. Depending on your relationship with the lender, the loan can take a week or less.

Location

Banks – Banks have a footprint they’ll lend within, which is typically very local.

Capital Funds – Hedge funds lend nationwide. They’re the best option for multi-state bridge loans.

Hard Money – Hard money lenders are flexible. But, they tend to lend locally, or in other areas they’re familiar with.

Valuation

Banks – Banks require an appraisal for all loans over $250,000. (And some loans under that amount).

Capital Funds – Hedge funds always require an appraisal.

Hard Money – There is no appraisal in the hard money loan process. That’s why they can close so much faster than everyone else.

Overview

Banks – Will be your cheapest but slowest options. They have high requirements.

Capital Funds – Middle of the road for cost and speed, but helpful if you need loans within multiple urban areas.

Hard Money – The most expensive option for bridge loans, but also the most flexible and the fastest.

How Do You Find Bridge Loan Lenders?

For bridge loans right now in these changing times, you need to be proactive.

Where to Search for Bridge Loan Lenders

Check with local real estate communities (REITs in your area, biggerpockets.com, etc). Once you get some lender names, call around. Overall, it may take some effort to find lenders.

Or you can offload the research onto us.

We search every day for the best bridge loans in the real estate world.

Email us with a question about a deal or a bridge loan need, and we’ll find a way to help: Info@TheCashFlowCompany.com.

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Text: "Bridge Loans"

The real estate market is changing. Here’s what you need to know about bridge loans in 2022.

Have you used bridge loans for your portfolio in the past? 

In 2022, all money sources are tightening for real estate investors. Interest rates are rising, banks are reluctant to lend, and lender requirements have shot up.

You might find you’ll need more bridge loans than ever before.

Here are 3 ways you can use bridge loans for real estate investing in 2022.

1. Gap Loans to Supplement Hard Money

In the current market, lenders’ priority is to lower their risk. Many hard money lenders are limiting loans to 65% of the after-repair value (ARV).

If you could still complete a project under-budget at 65%, you’ll be able to find a lot of funding options. But if your project will take more than 65% of the ARV to complete, you might need to bring in a bridge loan.

A bridge loan can fill the gaps left by a hard money loan – whether for a down payment, rehab expenses, or carry costs.

You can get a bridge loan from:

  • A hard money lender
  • A hedge fund
  • Real OPM

OPM (Other People’s Money) is the ideal option for this type of gap funding. OPM is real money from people you know. It can be used to bridge gaps in investments, refinance hard money, and more.

2. Buy a New Property with Bridge Loans in 2022

Another effect of the upcoming market is the amount of time houses will take to sell.

Instead of selling in two to three days, we’ll soon see houses taking two to three months to sell, depending on size and location.

Your investment career can’t come to a halt just because a house takes too long to sell. What if you find a great deal while your old project is still on the market? All your capital is tied up in that first property.

Bridge loans solve this problem.

A bridge loan puts a lien on both the new property and the old property. This gives you the equity needed to close on a new house before the money from selling the old one hits your pocket.

Bridging from one property to the next like this is the number one way investors use bridge loans.

3. Bridge Loans for Wholesalers

Wholesalers use bridge loans, too. Sometimes called “transactional” or “wholetailing” loans, these short-term funds are also a type of bridge loans.

This type of loan bridges a very small gap. Usually, it’s just the money needed for one day until the buyer’s money comes into the title company.

With these types of bridge loans, it’s important for wholesalers to find a lender who will give 100% financing, without overcharging.

What to Look For In Bridge Loans in 2022

Bridge loans are all about getting the right lender and the right position.

Terms of a Bridge Loan

It’s important to pay attention to the terms of a bridge loan. You want a lender who charges fewer points – even if their interest rate is higher.

You only have to pay interest in small, monthly chunks. With points, you have to pay a percentage of the whole loan. Since bridge loans are very short-term, you won’t end up paying much in interest anyway. However, you’ll still have to pay the points (regardless of how long you kept the loan).

Shop Around for Lenders

Make sure you shop around for the right lender for your bridge loan. Find out who does bridge loans, who can do them quickly, and who focuses more on the interest rate rather than other costs (originations, appraisals, etc.).

Bridge loans are meant to be quick, short-term, and relatively inexpensive. You want to find a lender who can provide that.

How The Cash Flow Company Can Help

The Cash Flow Company offers DSCR loans, traditional loans, and blanket loans. Plus, we have the flexibility of hard money.

If you have any questions about bridge loans in general or our bridge loans in particular, reach out!

Email us with a specific deal or question at Info@TheCashFlowCompany.com.

Join our weekly call where we work with investors’ deals in real time, every Thursday from 1:15 PM – 2:15 PM MST.

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