INVESTOR RESOURCES
LOANS
The Short-Term Bridge Loan Breakdown
HOW TO DETERMINE IF THIS LOAN IS RIGHT FOR YOU
by Nathan Zielinski, RCN Capital
hen investing in real estate, it is important to know all the
will need rehabbed, will be a rental or if it is already cash-flowing. These are good things to discuss with your lender right away to avoid any deter- rents later in the loan process.
property. Getting this cash quick- ly can also lead to making money quickly. A lot of lenders prefer these properties to be in rent-ready con- dition meaning that it is ready for a tenant to move in right away if one is not already in place. This benefit can go unnoticed, but it is a way to motivate you as the investor to start making money on your property with a short-term bridge loan. Other positive aspects of a bridge loan, especially with RCN Capital, is the great leverage you can expect from your lender. For example, the short-term bridge loan at RCN Cap- ital can get borrowers up to 80 per- cent LTV. You still have plenty options with the short-term bridge loan and can still get great leverage. On the other hand, there are cer- tain aspects of a short-term bridge loan that don’t make them the right fit for every investor. Bridge loans are much shorter than your average rental loan, and with that they come with a high- er interest rate than your standard 30-year loan. The rates for a short- term bridge loan are much closer to that of a fix-and-flip loan so if there are any plans of renovation, bypass- ing the bridge loan for a fix-and-flip loan would be the preferred option. On the flip side to that, if the prop - erty is in rent-ready condition in a great market, take advantage of a long-term rental loan and a low interest rate and start creating that
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options that are available. The two most common loan products that are offered are long-term rental loans as well as short-term loans for pur- chase and rehab (fix and flip). How - ever, at RCN Capital we have a few more options including a very helpful product known as the short-term bridge loan. A bridge loan is a 1–3-year loan commonly offered for investors that need a little more time deciding what their long-term plan will be for their property. They have the ability to start making money off the prop- erty with this shorter-term option and use that time to research their options. Borrowers can also use this short-term loan to complete rehab on the property, but this will have to be approved by the lender first. Some lenders will also require the borrower use their own money for rehab funds if that’s their plan for the property. The third option would be for the borrower to take advan- tage of any existing equity that they have in the property by taking out the loan for a cash out refinance. Be sure to speak with your lender about the qualifications and guide - lines to qualify for the bridge loan. For instance, at RCN Capital some of those requirements include a mini- mum 620 FICO score, an as-is value of $75k for the investment property as well as clarifying if the property
PROSAND CONS OF THIS PRODUCT
The biggest advantage of a bridge loan is the flexibility. When it comes to your real estate investment prop- erties, rushing into a decision just to make a quick buck can sometimes backfire. A bridge loan allows you to keep your options open for 12-36 months while you learn more about the industry and gain a better under- standing about what your next move should be. Based on the market and the location of your property, you can refinance into a long-term rental loan and take advantage of a cash- flowing property for up to 30 years. If the market is not forecasting long- term success in the area, take the opportunity to speak with your lend- er about doing any necessary rehab to make the home more desirable. You can maximize your profits on the property and be able to move on to your next investment. Another big plus is how quickly an investor can get cash from a lender to secure a real estate investment property. Borrowers don’t have to necessarily know what their long- term plan is, but they can get the cash in a timely manner for a rehab
32 | think realty magazine :: october 2021
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