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What are Commercial Bridge Loans and How Do They Work Winston Rowe & Associates
Commercial bridge loans act as interim funding, facilitating the purchase of commercial real estate and completion of rehabs or upgrades, but not acting as permanent financing.
By: Winston Rowe & Associates
Their primary use is when a property needs significant renovation before it will qualify for permanent financing.
Bridge loans typically have repayment terms of between 6 months and 3 years, after which the property is either sold or refinanced with permanent financing.
Reasons a commercial real estate investor use a bridge loan:
The property has unsatisfactory occupancy rates
The real estate investor's credit profile needs improvement
The real estate investors can't wait for permanent financing
Commercial bridge loans can be used for the purchase or refinance of office buildings, hotels, retail property, multifamily housing including apartment complexes, and even for raw land that will be developed for commercial purposes.
Commercial bridge loans feature quick closings and the loan amounts are based on the fully improved value of the property, rather than its "as-is" value.
In this way, commercial mortgage bridge loans provide the capital that a real estate investor needs in order to close on opportunities quickly, complete necessary renovations, and either sell or refinance into permanent financing with affordable monthly payments.
The most common purpose of a commercial mortgage bridge loan is for the purchase and improvement of an underutilized commercial property.
They enable you to both purchase a property that's in poor condition and perform needed renovations and upgrades.
How Commercial Mortgage Bridge Loans Work?
A commercial bridge loan works best when you're acquiring your target real estate at a large discount, typically due to poor condition or poor management.
Unlike permanent commercial real estate financing, bridge loans are highly customized products, so the rates and terms can vary significantly.
Commercial bridge loans work by lenders making riskier loans for short periods of time. While providers or permanent commercial real estate financing will lend based on current LTV (loan to value), commercial bridge loan providers will lend based on LTC or ARV (after-repair-
Winston Rowe & Associates a national due diligence and advisory firm published this article. They can be contacted at 248-246-2243 or online at http://www.winstonrowe.com