If you’re looking for flexible solutions to secure your commercial real estate, consider how bridge loans can help. After you secure your property, tackle the essential renovations and other details necessary to refinance for a long-term solution.
Some of the best commercial real estate deals need work. Whether you’re purchasing outdated office space or an apartment complex that needs immediate renovations, it can be difficult to secure a traditional loan to pay for these expenses. Instead of tying up your working capital, consider using a bridge loan to quickly purchase and repair the property.
Once you’ve upgraded those apartments or remodeled the office building, your real estate should see an increase in value. This allows you to refinance for a traditional mortgage or other long-term financing solution.
A bridge loan is typically secured by real estate, commercial equipment or other valuable assets. These short-term loans come with high-interest rates but have few restrictions on the types of investments you can make. That flexibility allows you to remodel your real estate as you see fit and find creative ways to improve the value and use of your space.
For even more flexibility, many bridge loans are non-recourse. This allows you to take out a loan with confidence because the only repayment option for your lender is the real estate itself. You won’t have to risk your other business assets in the event of a missed payment or failed investment opportunity.
A major disadvantage of a bridge loan is the risk that comes with high-interest rates. If your bridge financing strategy is successful, you’ll be able to quickly refinance and enjoy competitive interest rates. If it isn’t successful, you’ll experience unusually high rates that can be costly.
These loans aren’t for everyone. If you don’t feel that the essential renovations you’re about to perform will give you enough equity to refinance and cover the bridge loan, the short-term nature of this loan may not be for you. Other investors may struggle to use bridge financing due to low credit scores or other financial issues.
Whether you’re purchasing your first commercial real estate or taking advantage of a unique investment opportunity, bridge loans are excellent tools to help you get the most out of your real estate investment. Carefully choose your real estate and loan provider in order to find the perfect project that you can improve, refinance and enjoy as a business location or rental property.