Breaking into the real estate investing sector can be difficult if you are unsure of where to start. The good news is that bridge loans are viable funding solutions for investors of all experience levels and budgets. The team of financial experts at Express Capital Financing have been advising successful investors for decades, helping them leverage the resources available to them in order to accomplish their goals. They have compiled the following guide to help you determine if a bridge loan is an ideal fit for your next investment project.
What Are Bridge Loans?
Say you’re all set to purchase a promising investment asset, but it requires you to have capital on hand immediately. Going through a bank could take weeks or even months to get you the money you need, especially if you are attempting to acquire a loan backed by the government via the Small Business Administration (SBA). In an increasingly competitive real estate market, investors simply cannot afford delays associated with funding—that could literally make or break a deal.
That’s where private money lending comes into play. A bridge loan from Express Capital Financing allows investors to submit a cash offer while avoiding having to jump through any of tedious hoops involved with conventional mortgage providers. Bridge loans are a type of short-term financing option with term lengths typically under a year, specifically structured to allow you immediate access to the money investors need to close the deal on an investment property.
Bridge loans are perfectly suited for fix-and-flip investors and real estate developers planning to acquire property, make improvements to it and sell it at a significantly increased price. The funding provided by the bridge loan allows them to make the initial purchase and cover the costs associated with the rehab or construction while they finalize the details of a longer-term loan they can transition to after repaying the bridge loan.
Qualifying for a Private Money Bridge Loan
A key aspect of private lending is that it is a form of asset-based financing, meaning any loan is secured by either the property being acquired, or existing real estate already owned by the borrower. The team at Express Capital Financing implements an efficient and common-sense approach to the underwriting process when evaluating potential deals—meaning that the long-term profitability of the deal is the focal point as opposed to a borrower’s creditworthiness. A primary factor determining the amount of financing you can qualify for is the loan-to-value (LTV) ratio associated with the property. Generally, the higher the LTV ratio is, the riskier the deal is.
The LTV ratio is a figure that lenders reference to evaluate the risk level involved with extending credit to potential clients. LTV is calculated by dividing the proposed loan amount by what the property was appraised for and then multiplying the result by 100.
LTV (%) = (Proposed Loan/Appraisal Value) x 100
Advantages of Private Money Bridge Loans
Private money bridge loans are great options for investors looking for quick access to financing to close a deal in markets currently dominated by all-cash buyers. Here is an overview at some of the primary benefits of strategically using a bridge loan to fund your next investment transaction.
Instant Cash Flow
Investors often turn to private money loans after discovering the significant delays and stringent qualification prerequisites associated with traditional lending or they need cash flow to bolster their operations while awaiting the approval on a conventional loan. In either case, bridge loans give them immediate access to the cash they need to take the initial steps of pulling off a successful investment move—whether that’s acquiring the property itself, paying contractors to complete renovations on a distressed home, building a multi-family unit or all of the above.
Simplified Underwriting Protocol
Private money loans are collateralized by the underlying property, meaning that a borrower doesn’t have to have a stellar credit score or savings in order to qualify for a bridge loan. If the deal makes financial sense, Express Capital Financing will work with you to craft individually tailored, flexible funding solutions to make it happen. We leverage our extensive experience and ample resources to provide you with the insight and means to create an informed, effective investment strategy.
Get Started Today
Bridge loans are the perfect tool for savvy investors looking for a flexible and efficient funding option. Express Capital Financing offers a streamlined underwriting process, competitive terms and a wealth of industry experience. Contact us today to learn more about how we can help you finance your next investment move!