Multifamily bridge loans can cover both residential & commercial investment properties. In this article, we want to focus on commercial real estate financing solutions.
If you’re an investor looking into potentially increasing your portfolio and creating a more steady monthly income on the side, a Multifamily bridge loan can create a boost in your short-term profit!
Many borrowers/investors utilize this type of creative financing solution when they need to “bridge the gap” between their commercial mortgage and their permanent financing scenario.
Keep reading to see exactly when you should be focusing on getting a Multifamily bridge loan.
When Should You Get a Multifamily Bridge Loan?
Investors and borrowers should look into getting a multifamily bridge loan when their multifamily investment property is either stabilized or in need of minor-moderate repairs/renovations.
On top of this, it would benefit the investor to apply for a multifamily bridge loan when pursuing the addition of a value-added unit (ADU).
Besides the dictionary definition, you should apply for this type of loan if:
- You’ve just recently purchased a multifamily investment property and want to renovate it, add more dwelling units to it, or the property is stabilized (meaning that it has a projected range of rented occupancy).
And instead of having to look into a refinancing option or other sources of long-term funding, you can take out a quick loan that covers the future valuation and current valuation of the multifamily property.
Bridge loans in general are typically used by more experienced investors who understand the Capital Stacks that make up their investment portfolio.
These types of loans are usually more profitable and flexible than taking out a long-term loan especially if you’re income is self-reliant (looking at you: contractors and plumbers).
Multifamily Bridge Loan Rates and Terms
It’s important to equip yourself with the most updated information in regard to short-term financing options. Their flexibility and quick funding provide a decent amount of room to make mistakes or choose the wrong deal.
If you’re an experienced investor, then you’ve already heard this a million times, but it’s crucial to get different bride loan quotes from multiple lenders/institutions.
Think of it like buying a car, you don’t walk into the dealership and purchase the first car you see.
You shop around and negotiate the best deal possible, and if they can’t provide you with that then you go to a different dealership and use the original one as a negotiation tactic.
Especially in California, when you’re dealing with such large amounts of money, and important real estate investments, you want to make sure you get all your facts straight.
Bridge loans are known to be a more personalized/customizable loan solution, meaning that the lender (if they’re a professional one) can usually tailor it to your property's needs and requirements.
Multifamily bridge loans have higher interest rates than other financing options but cover a wide range of loan amounts. These types of loans correspond directly with the US real estate market’s volatile economy, which can be both beneficial and difficult to work with.
Bridge Loan Vs. Alternative Financing Options
Even though we are biased towards bridge loans for experienced investors (just because of the loan's quickness and flexibility with a lot of profit involved).
It would be unfair to not mention other completely viable financing options beside bridge loans that can be beneficial for plenty of investors.
A commercial property like a multifamily unit can have numerous creative financing options, all of which ultimately depend on the investor's goals, requirements, and terms.
Here’s a list of all the financing options for a commercial Multifamily property:
Best Lenders For a Multifamily Bridge Loan
When you’re searching for a multifamily bridge loan it’s important to note that you’re looking for a very specific and peculiar type of financing solution. This type of loan would require a lender to have a specialty knowledge surrounding the bridge loan field.
I would recommend searching around for “private lenders” and “hard-money lenders” as well as “mortgage lenders” in your google search to get specific corporations that can help you acquire a bridge loan quote.
It’s important to note that multiple lenders will give you different types of deals with loans and terms, but before you go to a lender requesting quotes you should have a set of steps completed.
The name of the game when it comes to Multifamily bridge loans is quick and short-term funding. Your goal is to make the loan process as smooth as possible so that your Capital Stacks can be as profitable as possible!
What are the Cons of a Bridge Loan?
- The most notable cons of acquiring a bridge loan lie in the negligence of the investor to consolidate and allocate funds correctly in the short amount of time given. Bridge loans have a short turnaround time, meaning (6-12 months) for profit to be seen and given!
How long does it take for a Multifamily Bridge Loan to get approved?
- Depending on the lender, it could take anywhere from 7-20 days for loan approval.
Do you pay the Multifamily bridge loan back monthly?
- Yes! The borrower is required to pay back the loan within the 6-12 month pay period.