How can a Fix-and-Flip bridge loan help with your investment property?

Investing in your property can be complicated, especially if you’re working on a fixer-upper project. Recently, the value of real estate properties has been appreciating. Homeowners are now starting to fully understand the worth of their properties, while potential buyers are now looking into home loans just so they can close a purchase before prices skyrockets.

If you’re looking into a fix-and-flip investment and wondering about the different housing loans that could be applicable for you, then a bridge loan can be a solution to your problem.

What Is a Bridge Loan?

A bridge loan is a mortgage that allows a homeowner or an investor to purchase a new property before they sell an old property, which—for homeowners—they may still be currently living in. Based on how it’s called, this type of loan could serve as a ‘bridge’ to fill a financial gap temporarily, especially since it’s even more difficult to qualify for more than one mortgage at the same time.

Essentially, this type of mortgage is short-term and ideally intended for real estate investors. If you’re looking into investing in real estate and would prefer to restore a potential fixer-upper property without buying outright with cash, then a bridge loan might help in your investment goals.


Why Choose a Bridge Loan for Your Investment?

Bridge loans are also called interim financing, gap financing, swing loans, or fix-and-flip loans. What a bridge loan can provide you, as an investor, is the money you’ll need to restore a property you want to invest in. In a few days, possibly with the help of a private lender, you can acquire one and continuously pay for it in six months to three years.

As an investor, what you need to know about a fix-and-flip loan is it can help you close a financial gap between a down payment of a property and your current mortgages and loans. Acquiring this type of loan will provide you with the amount you need for the down payment, just long enough to restore a real estate property you’re investing in.

You can use this strategy and build your real estate investment portfolio and even expand your business. One advantage of a bridge loan is you can invest in more than one property at a time. Fix-and-flip home loans can help you find new tenants, solidify your properties’ cash flow and even fix other environmental or financial issues. Once you sell or find a way to refinance your investment property, then you can easily pay back your loan.

What’s Your Purpose for Buying the Property?

Your purpose for buying the investment property is vital before you apply for a loan, and this applies to all types of housing loans, especially even in fixer-upper investments. With a bridge loan, you can easily use it to your advantage. Let’s say, after conducting a thorough assessment of the property you are investing in, you’ve concluded that it’s significantly undervalued. In this case, you can purchase it using a short-term bridge loan so you can eventually do a cash-out refinance after six months for cash recapture purposes.

 With private lenders, you can always take advantage of housing loans with lower rates. Cash-out refinances can be considered as “high-risk” loans, so the interest rates associated with them can be higher. So, if you’re 100 percent certain—and you’ve also consulted with your accountant—that what you’re buying is NOT undervalued and you’re very sure that you will hold, then you can go with a 30-year cash-out refinance loan.

Another way bridge loans can be useful is if you are running out of time and you need to close the property fast, then having the financial capability to pay for the down payment would come in handy.


What’s Your Purpose for Buying the Property?

With home loans, there is always one that could work best for your real estate investment needs. If you’re planning on investing in another fix-and-flip, you don’t have to worry about these common mistakes. Lendmarq can help you expand your portfolio and real estate investing business. Contact us today and purchase your next real estate property.