Risks & Rewards of Bridge Loans


Are you stuck in a situation where you want to buy a new property but are waiting for the sale proceeds of your existing property to go ahead and close this deal? If yes, waiting for a potential buyer to buy your current property is uncertain and isn’t an excellent idea. In such cases, commercial Bridge loans are your best bet!

Commercial Bridge loans are a boon to the world of real estate, as they help commercial real estate investors to buy the property they like while not waiting for the sale proceeds to actualize in cash, as time is of paramount importance when it comes to commercial real estate investing. This blog is a brief overview of what are bridge loans, their related risks and rewards, and how they can benefit you as a real estate investor. Read on also to explore how the rewards associated with Bridge loans will almost always outweigh the risks and why you should seriously consider opting out for a commercial Bridge loan. Read on!

What are commercial Bridge loans?

First things first. What are bridge loans? Commercial Bridge loans, as the name suggests, are loans that bridge the financial gap between present financial circumstances and future economic circumstances, provided for a short term of 3 months to 3 years, as an immediate cash financing to take care of borrower’s financial needs until a more permanent form of investment is made available. Typically, these loans are used when commercial real estate investors want to buy properties and are waiting for a particular sale transaction to be executed. So, these loans provide the needed funding to finance the new property while the proceeds of the sale of an old property are pending to be actualized.

Here are some scenarios where opting out for commercial Bridge loans makes the perfect sense.

•    When you are waiting for the sale transaction of your existing property to be completed, but at the same time wish to invest in a new property. This is the most typical case of using commercial real estate Bridge loan help a great deal here by providing you the direct financing that you need to buy the new property you have your eyes on.

•    When you want to make repairs and renovations to your existing property, to make it more attractive to the potential tenants who will be willing to pay you higher rents. In such cases, opting out for commercial Bridge loans is the best option as it’ll provide you the urgent funding needed to do the repairs and renovations, after which the chances of you earning higher rental income from your property increases, and thus you can pay off your bridge loan as and when you find your potential clients.

•    When you are looking for financing for arranging the working capital of your business until you strike a big deal, after which you can pay off the loan liabilities. If you’re waiting for a big deal to come through your way in your business but lack the funds needed to keep your business running till that point of time, again, commercial Bridge loans will be your best bet!

•    When you are looking for any form of direct financing to execute deals, with a hope that these deals will bring in passive income for you in the future. In a nutshell, commercial Bridge loans are big saviors in every situation where you need any form of direct financing to execute some existing obligation or to pay up upfront for any deal, which you are sure will bring in huge profits for you in the future.

So, that was a list of cases or scenarios where opting in for commercial real estate bridge loans makes absolute sense. If you find yourself in any of the above situations, get in touch with the commercial real estate bridge loan lenders today and explore the plethora of options you have got to choose from.

If you need any assistance or professional advice in terms of choosing the best of the best commercial real estate bridge loan deals, get in touch with us today, and we shall be glad to assist you in all ways we possibly can. Read on to learn about the risks and rewards associated with commercial real estate bridge loans.

Risks and rewards of commercial real estate bridge loans

Like every other financing option, commercial Real Estate bridge loans come with their set of risks and rewards. To make a wise decision of whether or not to opt for them, being aware of the risks and rewards in the first place is quintessential. Here’s an outline.

Rewards of commercial real estate bridge loans

•    Bridge loans provide the immediate funding needed – The first advantage of commercial real estate bridge loans is that they offer the direct funding that is needed to close a deal that is stringent on time or to get rid of an existing obligation.

•    Bridge loans take lesser time to process – In comparison with other forms of traditional financing, bridge loans take much smaller time to prepare, thus these loans are a big go-to when it comes to finding an immediate way of funding in as less time as possible.

•    Bridge loans do not require the borrower to have a fantastic credit score – Commercial real estate investing is all about rolling up the finances and turning around the deals at the right time and in the right location and carry home amazing and attractive deals.

On the way of doing this, many savvy commercial real estate investors tend to lose out on their credit score as the number of loan transactions increases and the credit hits bottom if and when the investors default in clearing their loan liabilities.

This leaves them in a place where they need to immediately look at other forms of financing and arrange for it in as less time as possible. In such cases, commercial Bridge loans could be a big savior as these loans help investors who have a poor credit score. Commercial Real Estate bridge loan lenders provide bridge loans to their borrowers based on the equity of the new property over the credit score of the borrower. Thus, if you have a poor credit score, you can always opt for commercial Bridge loans to finance your immediate needs.

•    Bridge loans are the best bet to pay off an existing financial obligation – Whether it is paying off the old mortgage on your existing property, or any other financial obligation, bridge loans are of great help as they’ll provide you with a quick form of financing to get rid of your existing financial obligations.

•    Bridge loans help you leverage on the benefit of time – The success in Real Estate financing revolves around making the right decision at the right time and being able to fund the hot deals right there. In times of finding excellent investment opportunities, bridge loans help you a great deal and provide you the leverage on the benefit of time, thus letting you capitalize on the opportunity in the best possible way.

Risks of commercial real estate bridge loans

•    Bridge loans require the borrower to provide the new property as collateral – Bridge loan lenders are not very keen on the credit score or the credit-worthiness of the borrower. But to compensate that, they do ask the borrowers to provide their new property on which they are financing this new bridge loan, as collateral in order for to lender to feel secure with his funds.

This can be a considerable risk, as there can always be chances of losing the new property in case you default in making your loan payments on time. However, if you are sure enough about your loan repaying abilities, then, this risk shouldn’t be of any glitch to you, and you’re good to go ahead and opt for commercial real estate bridge loans.

•    Risk of losing both the properties to the bank – With commercial real estate bridge loans, there’s always an open-ended risk of losing out on both existing property and the new property to banks in case you fail to make the loan repayments on time. This is a bad situation as you’ll be losing all the eggs in your basket.

Bottom line, it is imperative that you make a rather calculated and wise decision when it comes to choosing a commercial mortgage bridge loans. Consult loan agents or get in touch with real estate expert who is professionals in providing timely and valuable suggestions to investors at private capital investors.

That being said, how can you conclude whether the rewards of buying a commercial real estate bridge loan will outweigh the benefits of it?

There are a couple of things you’ll need to consider deciding whether or not the rewards of commercial Bridge loans will outweigh its benefits. Of them, the most important thing is how sure are you about the profit-making prospects of your new venture or new property? If you have a solid plan in place and are sure that you will be able to capitalize on the bridge loan and that your future financial circumstances will be better than the current one, then, choosing a bridge loan is absolutely a right option.

In these cases, you can be assured that the rewards will outweigh the risks – because the one significant disadvantage of Bridge loans is the consequences of non-payment of loans and losing of the properties to the bank as these loans come at the price of providing property as collateral. If you’re sure about the success of your endeavor, you can use bridge loans and be assured of good returns!

In case you have second thoughts about the success of your endeavor, you should seek the help of experts in the field who can surely help you to make the best decisions for you in the long run!

Want to learn more? Get in touch with us today.

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