Using Bridge Loans for Commercial Real Estate Purchases
There are numerous types of loans out there. Each one is beneficial under different circumstances, and you should seriously consider acquiring bridge loans when the opportunity presents itself. These loans are meant to provide a property owner with funding when he or she is in between financing with other types of loans.
This short-term funding is great for when you have a time-sensitive opportunity to pounce on. For example, if you have a large payment you need to make in the near future but it will be a while until you can secure more permanent financing, then a bridge loan allows you to make that payment until you can get on more secure footing. This gives you more breathing room and more time to lease up, refinance or sell your property.
It is often much easier to secure bridge loans than other forms of financing, but with those laxer terms, there comes greater interest rates. Most of the time, you will need to pay back a bridge loan in between six months to a year. Occasionally, you even receive the option to extend the repayment period for an additional six months. However, this will again come with a high interest rate. The idea is that you only need to money to address a short-term problem, but you will be able to pay it back quickly.
In a majority of cases, you can pay back the entirety of the bridge loan once you have more secure financing. You can pay back that bridge loan with a higher loan once you have secured it. You will then have to pay back the secondary loan, but hopefully it will have a lower interest rate attached to it, making it simpler to pay off sooner.
There are a variety of things commonly done when a commercial property owner secures a bridge loan. When you own an apartment complex, you may need to refinance the real estate, locate new tenants or conduct significant improvements. All of those can be accomplished quickly with the help of a short-term loan.
Bridge loans are not meant to be a permanent source of financing. You should already have a loan in place you likely used to secure the property in the first place. Even after you own the real estate, you will need more money in the future to maintain it. As the name suggests, these loans are merely meant to bridge the gap you will often find yourself in when it comes to maintaining your commercial real estate.