Tag Archive for: bridge loans

Bridge Loans: Do Bridge Loans Work for Fix and Flips?

Categories:

Today we are going to discuss Bridge Loans: Do Bridge Loans Work for Fix and Flips? Do Bridge Loans Work for Fix and Flips?  Yes, they can. In fact, a bridge loan can be a useful tool when your original fix-and-flip plan changes.

Maybe you finished the rehab, listed the property, and expected it to sell fast. However, the offers are not coming in. Or, perhaps buyers are offering less than you want.

Meanwhile, your fix-and-flip loan is still there. Every month, you have interest, taxes, insurance, utilities, and other costs. As a result, waiting for the right buyer can get expensive.

Instead of taking a low offer, you may have another choice. You could refinance the fix-and-flip loan into a bridge loan, rent the property, and give yourself more time.

A bridge loan does not fix every problem. However, it can give you something very valuable: time and flexibility to make a better decision.

Quick Answer: How Does a Bridge Loan Work for a Fix and Flip?

A bridge loan can pay off your current fix-and-flip loan and replace it with a short-term loan that may allow you to rent the property.

So, instead of leaving the home vacant while you wait for a buyer, you may be able to put a tenant in the property and start collecting rent.

Then, you have choices. You can keep the property as a rental and later refinance. Or, you can wait for a better selling season and put the property back on the market.

In other words, the bridge loan creates a bridge between what you planned to do and what you decide to do next.

Why Would a Flipper Need a Bridge Loan?

Let’s say you bought a property to flip.

You completed the work. The new kitchen looks great. The bathrooms are done. The paint is fresh. The property is ready for a buyer.

However, the market changed.

Maybe homes are taking longer to sell. Perhaps buyers have more choices. Or, maybe the offers you are getting would cut too far into your profit.

At the same time, your costs keep adding up.

For example, you may still have to pay:

  • Interest on your fix-and-flip loan
  • Property taxes
  • Insurance
  • Utilities
  • Lawn care and maintenance
  • HOA fees, if applicable
  • Other holding costs

Therefore, every extra month can eat away at your expected profit.

A bridge loan may give you another path.

The Main Problem: Fix-and-Flip Loans Are Made for Flipping

A fix-and-flip loan has a specific job. It helps you buy, repair, and sell a property.

However, it usually is not designed to become your long-term rental loan.

In fact, some fix-and-flip lenders may restrict your ability to rent the property while their loan is in place. Therefore, you should always check your loan documents before putting a tenant in the property.

If you decide to change your strategy from flip to rental, you may need a different type of financing.

That’s where a bridge loan can come in.

How Do You Move a Fix and Flip Into a Bridge Loan?

The process is much like a normal refinance.

First, the bridge lender reviews the property and your loan request. Next, the lender will usually order an appraisal or another valuation.

The lender then determines how much it can lend based on the property’s current value and its lending guidelines.

If the loan works, you move toward closing. At closing, the title company uses the new bridge loan to pay off your old fix-and-flip loan.

So, the process may look like this:

Fix-and-Flip Loan → Bridge Loan → Rent Property → Sell or Refinance Later

After closing, the bridge loan becomes the new mortgage on the property. Then, if the loan terms allow it, you can rent the property and start bringing in income.

How Much Can You Borrow With a Bridge Loan?

Bridge loans commonly use the property’s current as-is value to determine the maximum loan amount.

This is important because investors often think in terms of ARV, or After Repair Value.

However, if the rehab is already finished, today’s appraised value is now the key number.

For example, suppose your finished property appraises for $300,000.

If a bridge lender allows up to 70% LTV, the maximum loan could be around $210,000.

$300,000 × 70% = $210,000

However, lenders have different programs. Some may lend more or less. In addition, your loan amount can depend on the property, location, credit, experience, and other factors.

Therefore, don’t assume that every bridge lender will offer the same LTV.

Does a Bridge Loan Include Money for Repairs?

Usually, this type of bridge loan is different from a fix-and-flip loan with a rehab budget.

Why?

Because the property should already be repaired.

If you completed the rehab and had the property listed for sale, there may be little or no work left to do. Therefore, the new bridge lender may not need to hold a large repair escrow.

However, bridge loan programs vary. So, if the property still needs work, tell the lender upfront. You may need a different bridge product designed for unfinished properties.

Are Bridge Loans Interest-Only?

Many bridge loans offer interest-only payments.

That means your monthly loan payment covers the interest instead of paying down the loan like a standard 30-year mortgage.

For example, if you plan to hold the property for only six months, you may not want a long-term loan yet. Instead, an interest-only bridge loan can keep the financing temporary while you decide what to do next.

Still, interest-only does not mean cost-free. You still need to look at the rate, lender fees, closing costs, taxes, insurance, and other expenses.

The goal is to compare the cost of the bridge with the cost of doing nothing.

How Can a Bridge Loan Help Stop the Monthly Cash Burn?

This is one of the biggest reasons an investor may consider a bridge loan.

Imagine that your flip sits empty for another six months.

During that time, you still have loan payments and other holding costs. However, the property produces no income.

Now imagine that you refinance into a bridge loan and rent the property.

Instead of bringing in $0 each month, you may start collecting rent.

For example, suppose your total monthly carrying costs are $2,500.

If the property sits vacant, you may have to cover the full $2,500 yourself.

However, if you rent it for $2,300 per month, the property still may not create positive cash flow. Yet, your monthly cash drain could fall from $2,500 to around $200 before other expenses.

That’s a major difference.

Even better, if the rent covers all your expenses, you may be able to stop much of the monthly cash burn while you decide what to do next.

Why Not Just Leave the Property Vacant?

Cost is only one concern.

A vacant property can create other problems.

For example, you may worry about vandalism, theft, weather damage, maintenance problems, or someone entering the property without permission.

In addition, vacant property insurance can work differently from normal rental property insurance.

Therefore, renting the property may do more than create income. It may also put someone in the home who has a reason to take care of it.

Of course, being a landlord creates its own responsibilities. So, you need to weigh both sides before making the move.

What Happens After You Get the Bridge Loan?

This is where the flexibility becomes valuable.

Let’s say you refinance into a bridge loan and rent the property.

Now you can give yourself some time.

Perhaps you rent it for six months. During that time, you watch the housing market.

If prices improve and buyers return, you may decide to sell.

On the other hand, maybe you discover that you like the rental income. In that case, you may decide to keep the property.

Then, once you qualify, you could look at moving from the bridge loan into longer-term rental financing.

In other words, you don’t have to make every decision today.

Can You Refinance a Bridge Loan Into a DSCR Loan?

Potentially, yes.

A DSCR loan is designed for rental properties. Therefore, it can make sense if you decide that you want to keep the property long term.

However, the lender will still have requirements.

For example, it may look at the property’s rental income, value, your credit profile, ownership history, and other factors.

In addition, some lenders have seasoning requirements.

Seasoning simply means how long you have owned the property or how long certain conditions have existed.

Therefore, the bridge loan can give you time to rent the property, establish its rental history, meet any applicable seasoning requirements, and prepare for longer-term financing.

Bridge Loan vs. DSCR Loan: Which Is Better?

Neither loan is automatically better.

Instead, the better loan depends on what you plan to do with the property.

A DSCR loan may make more sense if you already know you want to hold the property as a long-term rental.

However, some DSCR loans have prepayment penalties. Depending on the loan, those penalties may last several years.

Therefore, a DSCR loan may be less attractive if you think you could sell the property soon.

A bridge loan may make more sense when you are still deciding.

For example, you might want a bridge loan if:

  • You don’t have a tenant yet.
  • You may sell the property soon.
  • You want time to test the rental strategy.
  • You need to pay off a fix-and-flip loan.
  • You don’t want to commit to long-term financing yet.
  • You need time to qualify for permanent financing.

So, think of the difference this way:

DSCR loan = I plan to keep this rental.

Bridge loan = I need time before I decide.

Do Bridge Loans Have Prepayment Penalties?

Many bridge loans may offer more prepayment flexibility than long-term rental loans. However, you should never assume there is no penalty.

Every loan is different.

Therefore, before closing, ask the lender:

“Is there a prepayment penalty, minimum interest requirement, or exit fee if I pay this loan off early?”

That question matters if you think you could sell or refinance within a few months.

After all, flexibility is one of the main reasons to consider a bridge loan in the first place.

Can I Sell a Property That Has a Bridge Loan?

Usually, yes, as long as your loan terms allow it.

When you sell the property, the title or closing company pays off the bridge loan from the sale proceeds.

Therefore, getting a bridge loan does not necessarily mean you have decided to keep the property forever.

You could refinance into the bridge loan today, rent the property, and sell it later if the market improves.

Again, check for any prepayment penalties, exit fees, or minimum interest requirements before choosing a loan.

Can I Pay Off a Bridge Loan Early?

Often, yes. However, it depends on the loan.

Some bridge loans may allow you to pay them off quickly without a traditional prepayment penalty. Others may have minimum interest periods or other early payoff costs.

Therefore, compare the exit terms before closing.

If your goal is flexibility, those terms can matter almost as much as the interest rate.

How Long Does a Bridge Loan Last?

Bridge loans are short-term loans.

Depending on the lender and program, the term might be several months, one year, two years, or another short period.

However, the goal usually isn’t to keep the bridge loan forever.

Instead, you use the time to reach your next step.

That next step could be:

Sell the property.

Refinance into a DSCR loan.

Refinance into a bank or other long-term rental loan.

The bridge is simply the financing between where you are now and where you want to go.

When Does a Bridge Loan Make Sense for a Fix and Flip?

A bridge loan may make sense when your original exit plan no longer works as expected.

For example, maybe your flip is finished, but the property isn’t selling. Perhaps you don’t like the offers you’re getting. Or, maybe selling today would mean giving away too much of your expected profit.

Meanwhile, holding the property vacant costs you money every month.

In that situation, a bridge loan can give you another option.

You may be able to pay off the fix-and-flip lender, rent the property, reduce your monthly cash drain, and give yourself more time.

Most importantly, you can make your next decision with less pressure.

When Does a Bridge Loan NOT Make Sense?

A bridge loan is not magic.

For example, it may not work if you owe too much compared with the property’s current value.

It may also not make sense if the expected rent is far below your monthly costs.

Likewise, if you know you want to keep the property for many years and you already qualify for good long-term financing, going directly into that loan could save you another refinance and another set of closing costs.

Therefore, always look at the full picture.

Ask yourself:

What does it cost me to keep doing what I’m doing?

Then ask:

What does it cost me to use the bridge and create another option?

Those two numbers can make the decision much clearer.

Example: Turning a Slow Flip Into a Rental

Let’s look at a simple example.

You finish a flip and put it on the market for $350,000.

However, the market slows down. After several weeks, your best offer is $320,000.

Meanwhile, you still owe $220,000 on your fix-and-flip loan, and your carrying costs keep growing.

Instead of taking the lower offer, you explore a bridge loan.

The property supports enough value to pay off the existing loan. So, you close the bridge loan and pay off the fix-and-flip lender.

Next, you rent the property.

Now you have rental income helping with the monthly expenses.

Six months later, you can look at the property again.

Maybe the market improved and you decide to sell. Or, perhaps the rental performs well and you refinance into a long-term DSCR loan.

Either way, the bridge loan gave you something you didn’t have before:

time and choices.

The Bottom Line: Do Bridge Loans Work for Fix and Flips?

So, Do Bridge Loans Work for Fix and Flips?

Yes, they can, especially when a finished flip isn’t selling and you want the option to turn it into a rental.

A bridge loan can pay off the existing fix-and-flip loan. Then, depending on the loan terms, you may be able to rent the property and start bringing in income.

From there, you have time to decide.

You can sell when the market improves. You can season the property and refinance. Or, you can move into a long-term rental loan if keeping the property makes sense.

However, remember the main purpose of a bridge loan.

It doesn’t need to solve every problem. It needs to get you safely from one plan to the next.

Sometimes, a little more time and flexibility can help you make a much better decision.

Watch my most recent video to find out more about: Bridge Loans: Do Bridge Loans Work for Fix and Flips?

by

Bridge Loans: Quickly Pay Down Your Credit Card

Categories:

Today we are going to discuss Bridge Loans: Quickly Pay Down Your Credit Card!High credit card balances can create a problem for real estate investors. You may have good income, a solid deal, and plenty of equity. However, your credit score may still hold you back. That is where Bridge Loans can help.

A credit card bridge loan is a short-term loan used to pay down credit card balances. As a result, your reported credit usage may fall. Then, your credit score may improve once the lower balances report to the credit bureaus.

Why does that matter?

Because a higher credit score may help you get approved for a loan. In addition, it may help you qualify for a better rate, lower fees, better terms, or a smaller down payment.

So, instead of letting high credit card balances slow down your next deal, you may be able to temporarily move that debt and put yourself in a better position to borrow.

What Is a Credit Card Bridge Loan?

A credit card bridge loan is temporary financing used to pay down credit card balances.

It is not meant to be long-term debt. Instead, it creates a bridge between where your credit stands today and where you need it to be for your next loan.

For example, maybe you just finished a fix and flip. However, the property has not sold yet. Meanwhile, you used your personal credit cards for materials, repairs, or other business costs.

Now you want another fix and flip loan. Or, perhaps you want to refinance the property into a DSCR loan.

The problem is your credit card balances.

Those balances may push down your credit score. Therefore, you could have trouble getting the financing you want.

A short-term bridge loan may allow you to pay those cards down before applying for your next loan.

Why Do Credit Card Balances Matter So Much?

Real estate investors use leverage.

After all, you may need money for materials, contractors, deposits, carrying costs, or unexpected repairs. In addition, many small business owners use credit cards to cover normal business expenses.

There is nothing unusual about using credit.

However, using personal credit cards can affect your personal credit score.

For example, you may have charged materials for a flip. The project ran over budget, so you charged another $5,000. Then, the house took longer to sell.

Suddenly, your cards have much higher balances than normal.

Even if you make every payment on time, those balances can still affect your score because credit utilization is part of credit scoring. The source video identifies revolving credit usage as an important part of the score and one that may be changed faster than factors such as credit history.

What Is Credit Card Utilization?

Credit utilization is simply how much of your available revolving credit you are using.

Here is an easy example.

Suppose you have $10,000 in total credit card limits.

If your balances total $2,000, you are using 20% of your available credit.

$2,000 ÷ $10,000 = 20% utilization

Now, suppose you spend $6,000 on materials for your next flip. Your total balances rise to $8,000.

Your utilization is now:

$8,000 ÷ $10,000 = 80% utilization

That is a big change.

As a result, your credit score may fall even though you have not missed a payment. The original example uses this same $10,000 credit limit to show the difference between 20% and 80% utilization.

Therefore, when you are preparing to apply for financing, it can help to know both your credit score and your credit utilization.

Why Does a Higher Credit Score Help Real Estate Investors?

Your credit score can affect the financing available to you.

Generally, stronger credit can open more doors. Depending on the loan program, it may help with approval, rates, fees, leverage, or required cash.

On the other hand, a lower score may reduce your choices.

For example, imagine you are refinancing a flip into a rental.

The property works as a rental. The rent looks good. The value works. However, your credit score dropped because you ran up your cards while finishing the rehab.

Now your lender may have fewer loan options for you.

That can create a frustrating situation. The real estate deal may work, yet temporary credit card balances are making the financing harder.

This is one reason a credit card bridge loan can be useful.

How Does a Credit Card Bridge Loan Work?

The basic idea is simple.

First, find out what is hurting your credit score.

Next, look at your revolving credit balances and limits.

Then, determine how much you would need to pay down to improve your utilization.

After that, you can use a short-term bridge loan to pay down the targeted balances.

Most importantly, you want the lower balances to appear on your credit report before your new lender pulls your credit.

Once the lower balances report, your lender can pull a new credit report. If your score improves enough, you may have access to better financing options.

Finally, after you close the longer-term loan or sell a property, you can pay off the bridge loan.

So, the strategy may look like this:

High card balances → Bridge loan → Lower card balances → Updated credit report → Apply for financing → Pay off bridge loan

The goal is not to make debt disappear. Instead, you are temporarily changing where the debt sits so revolving utilization does not create the same credit-score problem.

Timing Matters When Paying Down Credit Cards

One of the most important parts of this strategy is timing.

Paying a credit card today does not always mean your credit report changes today.

Credit card companies report account information to the credit bureaus on their own schedules. Therefore, you need to know when each card’s balance is likely to report.

For example, suppose one of your card statements closes on the 17th.

You may want to lower that balance before the statement closes so the lower balance can appear when the issuer next reports.

Meanwhile, another card may close on the 28th.

Therefore, you may need a different payoff date for that card.

The source explains that different accounts report at different times and recommends paying balances down before the relevant statement cycle when using this strategy.

So, do not simply send money to every card on the same day.

Instead, understand each card’s statement cycle and reporting pattern.

You May Not Need to Pay Every Card to Zero

Here is another important point.

The goal is not always to pay off every credit card.

Instead, the goal may be to lower your utilization enough to reach the credit range needed for your loan.

For example, suppose you owe $40,000 across several cards.

You may think you need a $40,000 bridge loan.

However, perhaps paying down $18,000 produces the utilization change you need.

If so, borrowing $40,000 may not make sense.

Therefore, start with the numbers.

Use a Credit Score Simulator Before Borrowing

Credit score simulators can be helpful before you make a move.

Some credit services offer tools that let you test different situations. For example, you may be able to see what could happen if you pay down one card, several cards, or a certain amount of revolving debt.

The source specifically recommends using a simulator to test how paying down different credit card balances could affect your score.

Of course, a simulator cannot promise an exact future score.

Still, it can help you make a smarter decision.

Instead of saying, “I need to pay off all my credit cards,” you can ask a better question:

How much do I need to pay down to put myself in a better lending position?

That is a much more useful number.

Example: A Flipper Needs Another Loan

Suppose an investor has a flip listed for sale.

Unfortunately, it is taking longer to sell than expected.

The investor has also used personal credit cards for materials, contractor payments, and carrying costs. Therefore, the balances are much higher than normal.

Now another great flip becomes available.

The investor wants to borrow money for the new deal. However, the higher credit card balances have hurt the investor’s credit score.

As a result, the new lender may require more money down. The lender may also offer a higher rate or different terms. In some cases, the investor may no longer qualify for the desired loan program. These are the same types of financing problems described in the source when a flip has not yet sold and card balances remain high.

Instead of waiting for the first property to sell, the investor could look at a short-term bridge loan.

The bridge loan pays down enough of the credit cards to lower utilization.

Then, the investor waits for the lower balances to report.

Next, the lender pulls an updated credit report.

If the score improves enough, the investor may qualify for better financing on the next deal.

Finally, when the first property sells, the investor can use part of the proceeds to pay off the bridge loan.

That is the “bridge.”

It helps cover a short gap between two financial events.

Example: Refinancing a Flip Into a Rental

Here is another common situation.

You planned to flip a house. However, the market changed, and you decide to keep the property as a rental.

Now you want a DSCR loan.

The property may work perfectly as a rental. However, you used your credit cards to finish the rehab. Therefore, your utilization is high and your score dropped.

You could wait until you save enough money to pay the cards down.

However, that could take months.

Instead, you may be able to use a bridge loan to lower those balances now.

Once the lower balances report, you can apply for the DSCR loan with your updated credit profile.

Then, after the refinance closes, you can pay off the short-term bridge loan as planned.

Compare the Cost of the Bridge Loan With the Savings

A bridge loan is not free.

Therefore, you should always compare its cost with the possible benefit.

For example, suppose the bridge loan costs you $3,000.

However, improving your credit helps you qualify for financing that saves you $7,000 in rate, points, fees, or required cash.

In that situation, spending $3,000 to potentially save $7,000 may make sense.

On the other hand, suppose the bridge loan costs $5,000 and the better financing only saves $2,000.

That probably does not make sense.

Therefore, treat financing like any other cost in your real estate deal.

You already compare prices for windows, flooring, labor, appliances, and contractors. You should compare financing costs the same way. The source makes this same point: financing should be treated as another line item in the project.

The goal is simple.

Put more money in your pocket at the end of the deal.

A Credit Card Bridge Loan Is Not the Only Option

You do not always need a bridge loan to use this strategy.

For example, you might have cash sitting in savings. You may have access to a HELOC. Or, you may have another short-term source of funds.

The key is understanding the goal.

You want to lower the reported revolving balances without creating a bigger financial problem somewhere else.

Therefore, look at all your options.

If you already have cheap money available, use it.

However, if your money is tied up in a property and you need to move quickly, a short-term bridge loan may fill the gap.

Avoid Running the Credit Cards Back Up

This part is critical.

A credit card bridge loan should solve a temporary problem. It should not give you room to create more debt.

For example, suppose you borrow $30,000 to pay down your credit cards.

Your score improves, and you get the new loan.

Great.

However, if you immediately charge another $30,000 back onto those cards, you now have the bridge loan and $30,000 in new credit card debt.

That defeats the purpose.

Therefore, you need a clear exit plan before using this strategy.

Know where the money to repay the bridge loan will come from.

Maybe a property is under contract to sell. Perhaps you are completing a refinance. Or, maybe another known source of cash is coming soon.

Either way, know the exit before you borrow.

Protect Your Credit Before You Need Your Next Loan

Credit becomes especially important when you need financing quickly.

Therefore, do not wait until the day you apply for a loan to look at your cards.

Check your balances.

Know your limits.

Watch your utilization.

Also, learn when your cards report.

If you use cards heavily for your real estate business, consider whether your current credit setup is helping or hurting you.

The better you understand your credit, the fewer surprises you may face when it is time to finance your next property.

When Could a Credit Card Bridge Loan Make Sense?

A credit card bridge loan may be worth exploring when your credit card balances are temporarily high, you expect a property sale or refinance soon, and those balances are limiting your financing choices.

It can also make sense when you need to move on another investment before your current property sells.

However, the numbers still have to work.

You should know the cost of the bridge loan, how much you need to pay down, when the lower balances should report, what financing you expect to qualify for afterward, and how you will repay the bridge loan.

If those pieces fit together, the bridge can help solve a short-term problem.

The Bottom Line

High credit card balances do not always mean you are in financial trouble.

Sometimes, they simply mean your cash is tied up in your business.

You may have bought materials. You may have paid contractors. Or, perhaps your flip is taking longer to sell.

However, those balances can still affect your credit score. In turn, that can make your next loan harder or more expensive.

A credit card bridge loan may give you another option.

You temporarily pay down the cards. Then, you allow the lower balances to report. After that, you apply for the financing you need.

Most importantly, run the numbers first.

The goal is not simply to raise a credit score.

The goal is to use your credit and financing in a way that helps you keep more money from every real estate deal.

Watch my most recent video to find out more about: Bridge Loans: Quickly Pay Down Your Credit Card

by

When Is a DSCR Loan Cheaper Than a Bridge Loan?

Categories:

Here’s how you can tell whether a DSCR loan is cheaper than a bridge loan for a flip on the market.

When a flipped house isn’t selling, many investors resort to converting the house into a rental while they wait out the market. You can use a bridge loan or DSCR loan to do this.

But how do you tell which loan you should use? What are the qualities of each one? Is the DSCR loan cheaper than a bridge loan? Here’s what you need to know.

Using a DSCR Loan to Turn a Flip Into a Rental

A DSCR loan is the perfect longer-term option if you need to switch your fix-and-flip property to a rental. 

First of all, a DSCR loan is based only on:

  • Your credit score (640-680 minimum).
  • The LTV (maximum of 80%).
  • Whether the property’s rent covers monthly expenses (including mortgage, insurance, taxes, and HOA fees).

There’s a variety of DSCR loans available – interest-only, 40-year amortization, regular 30-year, etc. Whatever loan you get, there’s an important detail to consider for all DSCR loans…

The DSCR Prepayment Penalty

The downside of a DSCR loan is the prepayment penalty.

Each loan has a term set for this penalty. If you pay off the loan before that term ends, you’re charged an exit fee. However, the fee amount does decrease each year.

As an example, one common structure for DSCR loans is a 5-year prepay penalty with a 5% fee. If you pay 4 years early, the fee goes down to 4%, 3 years, 3%, etc.

Additionally, there’s always a point where a DSCR loan, despite the prepay fee, becomes cheaper than a bridge loan.

Is a DSCR Loan Cheaper Than a Bridge Loan?

We’ve covered that the DSCR loan comes with the prepayment fee. Sounds pricey. But we also have to consider that the bridge loan will have a much higher interest rate.

Difference in Cost

If you intend to keep a property for more than 2 years, then a DSCR loan will always end up costing less, despite the fee.

But if you only want the property for 1 year or less, then the bridge loan will always be cheaper.

The gray area is the 1-2 year range. It varies with each loan, but there’s a tipping point somewhere in that timeframe where the bridge loan (with interest) becomes more expensive than a DSCR loan (with prepay fee).

Difference in Time

An underrated aspect of a DSCR loan is its built-in peace of mind. We have our educated guesses about how the market will go, but at the end of the day – things don’t always go as planned.

With a DSCR loan, if you end up needing to keep the property for 3, or even 30 years, you already have a product in place.

After one year with a bridge loan, you commit to either getting rid of the property or putting another loan (like a DSCR) in place.

Read the full article here.

Watch the video here:

by

Numbers Don’t Lie: Turn Your Flip into a Rental Now

Categories:

These numbers show you when it’s time to turn your flip into a rental.

What do you do with a flip that won’t sell?

The question is: is it smarter to leave the house on the market and keep dropping the price? Or take it off and turn it into a rental now before rates go further up and prices further down?

You don’t want to sell for a price that loses you money. But if you refinance into a rental, you know it’ll be negative cash flow.

It can feel lose-lose. But we can show you the better way out.

Let’s go over the numbers behind this, so you can look at this problem clearly. Here’s what it will look like if you turn your flip into a rental now.

How Bad Is the Negative Cash Flow?

The hesitation for many investors in this situation is: if you take the property off the market, the house has negative cash flow. The price is too high, and the rent probably won’t cover the costs. Why would you intentionally put yourself in a situation where you’re losing money?

But the reality is: the house is a negative cash-flowing property now. Every month the house is on the market, you pay interest. That money adds no value to the property – you’re just draining your money straight into your lender’s pocket.

Even if you don’t refinance with a rental loan, you already have a negative cash flow property.

Why not take the step to turn your flip into a rental now and reduce the amount of money you’re losing each month?

Refinance a Flip To a Rental

Typically, people spend more money leaving a house on the market for 2 or 3 months than they would turning it into a negative cash flowing rental for 2 years.

Would you rather pay $2,500 per month on a house with a for sale sign on it? Or get $2,200 in rent and only pay $300 of your own money per month? This is the question you’re left with when your flip isn’t selling in this market.

Turning a Flip to a Rental in Past Down Markets

Take a lesson from 2008 and 2009. Many investors who sold during the crash later realized that if they had waited 3 or 4 years, they could have made their money back on those properties.

Not only would their property values have gone up, but rates would have come down. Those properties would have become major assets. Instead, investors took a big hit selling in a down market.

Negative DSCR and No-Ratio Loans

So if you decide to go with this negatively cash flowing property, what are your options for a loan? 

Let’s go over the negative DSCR and the no-ratio loan programs.

These loans allow you a 30-year fixed product that’s interest-only. These DSCR loans work even on properties that aren’t cash flowing.

Typically for a DSCR loan, the rent from the property has to at least cover the monthly expenses (principal, interest, taxes, and insurance). Outflow has to equal inflow.

But these negative DSCR and no-ratio options allow you to refinance rental properties even when you bring in less rent than you pay out per month.

Refinancing with Bridge Loans vs DSCR

Getting a DSCR or no-ratio loan from a new lender is typically a better move than continuing to refinance with bridge loans from your current lender.

You don’t know where the market will be in 12 to 24 months. We know that long-term, the markets will come back, but what if that doesn’t happen for 3 years? You could get stuck refinancing with a bridge loan year after year, charging points with each refinance.

DSCR loans are often a better option in this situation. You just have to know your numbers.

Let’s go through an example so you know exactly how to calculate a DSCR loan and see if it’s the smart choice for you.

Using a DSCR Loan to Combat Negative Cash Flow: The Numbers

Let’s look at an example with a $300,000 loan. We’ll assume that both the original flip loan and the DSCR loan you’re refinancing into are interest-only.

This $300,000 flip loan has a 10% interest rate. That means you’re paying $2,500/month just for interest. This is the current negative cash flow of the property.

On the other hand, if you can get a DSCR loan for a 7% interest rate, you’d be paying $1,750/month instead. Plus, you could get a tenant renting for $1,800/month.

At this point, $1,800 would be coming in, and $1,750 would be going out for mortgage payments. This is actually a positive cash flow of $50/month.

However, your mortgage isn’t your only expense on this property. We still have to take taxes and insurance into consideration. Let’s say both of those costs add up to $300 per month. 

This raises the total expenses with a DSCR loan to $2,050 per month, bringing the cash flow to a -$250 every month.

Flip Loan vs DSCR Loan Compared

Obviously, you never like to lose money on a property. But that $250 of negative cash flow multiplied by 12 months is only $3,000. After 2 years, it’s $6,000. That may seem like a lot, but let’s look back at what you’d spend with the original flip loan.

If we go back to our example, remember we’d be paying $2,500 per month in interest, plus $300 in taxes and insurance with the original flip loan. That’s $2,800 spent for 1 month with the flip loan – close to the $3,000 for the full year with a DSCR loan!

If you keep the house on the market with this flip loan for 2 months, it’s $5,600. That’s comparable to 2 years of out-of-pocket costs if the same property was converted into a rental. 

This is how you have to look at the numbers in this scenario. It will help you determine what’s right for your flip. Is it better to wait for the market and shell out thousands of dollars in the meantime? Or rent the property with a little negative cash flow for 2-3 years in hopes of recouping an extra $100k in equity when the markets come back? (Or at least until rates come back down so you can refinance?)

In many cases, it makes more sense to turn your flip into a rental ASAP with a negative DSCR or no-ratio loan.

What Should You Do Next?

If you feel ready to refinance your flip into a rental, act quickly. Rates are going up, prices are going down.

There are some downsides to no-ratio and DSCR loans. Let us know you’re looking, and we’re happy to help you find the best loan for your situation.

The Cash Flow Company looks at hundreds of loans every month to find the best terms for investors, with the lowest down payments, highest LTVs, and best rates. Let us run the numbers on your property, and we’ll let you know what product will be best for your situation.

We want to get you to a place where you reduce negative cash flow and get back into some profitable flips. Email us at Info@TheCashFlowCompany.com.

by

How to Turn a Flip Into a Rental

Categories:

Stuck on the market? You might need to turn a flip into a rental… Here’s how!

What do we do with these flips that aren’t selling?

First, you have a big decision to make quickly – will you turn the flip into a rental?

You get the freedom of a little cash flowing in while you wait out the bad market. Depending on how long you’re willing to wait, you have a couple options to get into a temporary rental.

Here’s what you need to know about turning a flip into a rental with DSCR or bridge loans.

Using a DSCR Loan to Turn a Flip Into a Rental

A DSCR loan is the perfect longer-term option if you need to switch your fix-and-flip property to a rental. First of all, a DSCR loan is based only on:

  • Your credit score (640-680 minimum).
  • The LTV (maximum of 80%).
  • Whether the property’s rent covers monthly expenses (including mortgage, insurance, taxes, and HOA fees).

There’s a variety of DSCR loans available – interest-only, 40-year amortization, regular 30-year, etc. Whatever loan you get, there’s an important detail to consider for all DSCR loans…

The DSCR Prepayment Penalty

The downside of a DSCR loan is the prepayment penalty.

Each loan has a term set for this penalty. If you pay off the loan before that term ends, you’re charged an exit fee. However, the fee amount does decrease each year.

As an example, one common structure for DSCR loans is a 5-year prepay penalty with a 5% fee. If you pay 4 years early, the fee goes down to 4%, 3 years, 3%, etc.

Additionally, there’s always a point where a DSCR loan, despite the prepay fee, becomes cheaper than a bridge loan.

DSCR vs Bridge Loan – Which Is Better for Turning a Flip Into a Rental?

The two main options when you need to turn a flip into a rental are a DSCR loan or a bridge loan. But how do you know which to pick? 

We’ve covered that the DSCR loan comes with the prepayment fee. But the bridge loan will have a much higher interest rate.

Difference in Cost

If you intend to keep a property for more than 2 years, then a DSCR loan will always end up costing less, despite the fee.

But if you only want the property for 1 year or less, then the bridge loan will always be cheaper.

The gray area is the 1-2 year range. It varies with each loan, but there’s a tipping point somewhere in that timeframe where the bridge loan (with interest) becomes more expensive than a DSCR loan (with prepay fee).

Difference in Time

An underrated aspect of a DSCR loan is its built-in peace of mind. We have our educated guesses about how the market will go, but at the end of the day – things don’t always go as planned.

With a DSCR loan, if you end up needing to keep the property for 3, or even 30 years, you already have a product in place.

After one year with a bridge loan, you commit to either getting rid of the property or putting another loan (like a DSCR) in place.

A Close Look at the Numbers

To help us understand when a DSCR loan becomes the cheaper option, let’s look at an example. Then we can see exactly when the scale tips in the DSCR’s favor.

Let’s say we get a DSCR product with the following numbers:

  • A higher interest rate at 8%
  • All fees and loan costs at 2.5%
  • We’re a year or two into the loan and the prepay penalty is down to 4%

Let’s look at the number comparison for a $250,000 loan.

The DSCR loan’s 8% rate adds up to $20,000/year. The fees at 2.5 points is $6,250. Lastly, that 4% penalty will cost us $10,000.

Now let’s factor in our bridge loan numbers. The average bridge loan for a $250,000 loan would look like an 11% rate costing $27,500 per year. This is $7,500 more yearly than the DSCR loan, or $625 more per month. The closing costs would be the same for the bridge loan, and then, of course, no prepay fee.

You can see the bridge loan is still almost $3,000 cheaper than the DSCR loan.

These calculations only represent year one of the loan, however. Within that first year, a bridge loan will definitely be cheaper. But let’s look at how things change at month 15:

The bridge loan’s interest starts adding up, and suddenly the DSCR doesn’t seem so expensive. And at month 16, the loans are the same price:

After 16 months, the DSCR loan in this scenario would always be the cheaper option. And every year, the DSCR’s prepay fee drops lower; meanwhile, the bridge loan keeps accruing high interest at the same rate.

Is 16 Months a Realistic Timeline for the Market Right Now?

We expect that the market won’t pick back up for another 14-16 months anyway. If your flip is stuck on the market now, you could:

  1. Get a DSCR loan for the property.
  2. Take a 12-month tenant.
  3. Leave 4 months to spare for getting the house ready, on the market, and closed.

This puts you right at the 16 month minimum to make the DSCR loan worthwhile.

I Want to Turn My Flip Into a Rental

If you have a flip on the market now, converting it to a rental could be right for you. Do you know your tipping point? Should you get a DSCR or bridge loan? Bring your property to us, and we can give you an exact idea of the numbers.

Send us an email at Info@TheCashFlowCompany.com. Let’s get you connected to the right lender.

by

How This Real Estate Market Is Impacting Bridge Loans

Categories:

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:

by

How to Use a Bridge Loan to Buy a New Property

Categories:

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:

by

Refinancing: DSCR Loans vs Bridge Loans

Categories:

Refinancing can save you from a bad fix-and-flip. But which is better: DSCR loans vs bridge loans?

This market could force you to sell your fix-and-flip for much less than anticipated. Or – it could not sell at all.

When your lender asks for the money from your flip loan, a refinance could be the solution. Refinancing buys you time. With the right refinancing loan, you can safely wait for a better market to sell the property.

Let’s take a look at DSCR loans vs bridge loans for this type of refinancing.

DSCR Loans

Are you open to keeping your flip for a little longer term? Would you convert it to a rental in the meantime? If so, a DSCR loan is a great way to refinance out of a fix-and-flip.

A DSCR loan is a type of rental loan, based only on:

  • Your credit
  • Rental income from the property (not your personal income)
  • LTV (appraisals, listing price, etc that show the value of the home)

If you’re considering a DSCR loan, let’s look at the pros and cons of shifting gears from a flip to a rental.

DSCR Loan Pros

A DSCR lender will loan you up to 80% of the value of the home.

Cash Flow Opportunity for Your Flip

Your options for a DSCR loan product are broad. You can get anything from an interest-only to a 40-year loan.

With these options, you can spread the payments out. With lower payments and a potential tenant, you can match the cash flow to break even on the property (or maybe even bring in positive cash flow!).

This cash flow frees up your money to buy more flips and keep your business going. With that free money, you can jump on the good deals that will pop up in the next few months.

“Easy” Loan

Some of the biggest advantages of a DSCR loan is how easy it can be to apply and qualify.

For this type of loan, there are no income requirements. You just need good credit and rent that covers the monthly loan payment.

DSCR Loan Cons

There’s one important trick to refinancing a house that’s been on the market:

The appraiser is going to use the last price the house was listed for in their appraisal.

It’s tempting to drop the price when you have a flip on the market to try and attract a buyer. But once you decide to refinance, your house won’t appraise for higher than that lowest listed price.

So, it’s important to decide what you want to do with a flip ASAP. If you know you may want to refinance, you don’t want to keep lowering the list price, or it will negatively impact you.

Pre-payment Penalty

All DSCR loans have some kind of pre-payment penalty. Many are for around 3 years.

This means you have to keep the loan for that period of time, otherwise you’ll be charged a percentage fee for paying off the loan early.

If you want to keep this loan on your property for less than 3 years, you’ll be stuck paying that pre-payment penalty with a DSCR loan.

Not Available for Rural Areas

Also, DSCR loans are not designed for smaller towns. They can be great if you’re in a larger community, but they’re just not available in small ones.

And as money tightens up overall in the real estate lending space, DSCR programs are tightening up too. Rates will go up, LTVs will go down, and they will concentrate more on city centers. 

Most DSCR loan programs go as far as 25 miles from a city. But anything that shows up rural on an appraisal will likely not qualify for DSCR.

Bridge Loans

A bridge loan is a short-term loan that’s designed to give you flexibility on flips that are slow to sell.

With a bridge loan, you’re free to keep the house on the market, or convert it to a rental. The main purpose of a bridge loan is to get you out of a tough situation with the lender of your flip. What you choose to do with the house afterward is flexible with a bridge loan.

Bridge Loan Pros

Bridge loans are designed to help you refinance out of a flip. It gets you out of your original loan quickly –which is crucial when you’re getting calls from your lender. Plus, it helps you from paying high monthly payments with no cash coming in.

Additionally, bridge loans:

  • have no pre-payment penalty
  • can be interest only
  • close very quickly.

Bridge Loan Cons

Too Short-Term?

Bridge loans are short-term – varying between 1 and 3 years. 

In our market, we don’t expect interest rates to trend down for at least another year. If your bridge loan only covers you for a year, that might not be enough time to carry you into a better market.

You’ll want your refinance bridge loan for at least 2 years to give you some flexibility with the property.

You may need to shop around – 3-year bridge loans can be difficult to find, and many are limited to 1 year only.

Low LTV

Bridge loans are usually only 65% to 70% of the house’s current appraised value. 

Again, remember that your listing price will have a direct impact on that appraised value. If you slide the price down on the market to attract buyers, your refinance loan will be lower.

DSCR Loans vs Bridge Loans to Refinance

When we meet with a client about how to refinance out of a fix-and-flip, we weigh DSCR loans against bridge loans.

There’s always a tipping point – usually somewhere between the 14th and 17th month of a DSCR loan – where the pre-pay fee becomes cheaper than a bridge loan.

Bridge loans typically have 2% to 4% higher annual rates over a DSCR loan. Always analyze this tipping point, and choose the right loan (DSCR loans vs bridge loans) for you based on the length you’ll need it.

Read the full article here.

Watch the video here:

by

What Is a Bridge Loan?

Categories:

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:

by

Why Are Bridge Loans So Popular Right Now?

Categories:

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.

by