Bridge The Gap With Short-Term CRE Financing Options

Bridge The Gap With Short-Term CRE Financing Options

Gone are the days when people’s real estate investment future lay in the hands of traditional bank lenders. Conventional lending models provided consumers with minimal options, a lot of red tape, and locked them into 15-30 year terms. While there are certainly still investment opportunities that benefit from a traditional lending model, private lending companies have dramatically expanded options for investors. 

Private Bridge Loans

Private Capital firms like Broadmark have blown open the doors of possibility by providing short term real estate financing. If you’re looking to secure a private bridge loan, this post will walk you through need-to-know information about short-term financing. As an overview, bridge loans give borrowers cash for a short period of time so they can have enough capital to start, continue or finish an investment project. 

On a small, individual scale, this can look like lending funds to someone so they can buy a new house, while they wait for their old house to sell. On a larger scale, bridge loans help investors start construction on a residential or commercial project, with the investor’s intention being to sell the buildings upon completing construction. Other times, investors use a bridge loan to help cover costs of construction while they wait to acquire a long-term loan.  

Broadmark’s bridge loan portfolio focuses on up to 36-month terms to provide borrowers cash flow to steer their project towards a lucrative return. Read on to see why private interim financing may be your next step as you build equity.

start construction on a residential or commercial project

Why Bridge Loans Open the Doors to Lucrative Investments

Rapid Turnaround

Securing a traditional loan can take weeks, if not months. There is typically a massive exchange of paperwork, exhaustive credit checks, and cumbersome underwriting procedures that delay closing. Bridge Loans offer a rapid solution that is on pace with how the market works. Some say “cash is king”, but a bridge loan can be the next best thing. 

Less Red Tape

Obstacles like credit history reports and inflexible terms can prevent even the most determined investors from acquiring new opportunities. Since they are short-term and straightforward, bridge loans pave the way for investors to get started on their projects, turn a profit, and build wealth to continue investing. 

Helpful for Multiple Real Estate Property Types

Savvy real estate investors are keen on purchasing opportunities ranging from land development to urban infill to asset repositioning. Bridge Loans provide investors the freedom to invest in multiple types of real estate with ease. 

The Ins and Outs of Gap Financing

For investors exploring private short-term loans for the first time, it may seem counterintuitive to some traditional real estate wisdom. For ages, people were guided to invest in a property and hold on to it through multiple economic cycles, in the hopes of building equity. In some cases, this idea still holds water. In other cases though, the market favors projects that can stand up quickly (think: construction of new housing or commercial spaces), and then be sold to individual buyers. In those scenarios, a CRE bridge loan is an excellent means for reaching goals quickly, and expanding your portfolio. 

Let’s dig in to some more details about gap financing: 

What is The Criteria for a Bridge Loan? 

At Broadmark, our comprehensive bridge loans are available for Urban Infill, Multifamily and Commercial real estate projects. 

Our general terms include:

  • Loans in the $2M to $40M range 
  • We offer both senior & participating debt options. 
  • Our terms last up to 36 months
  • LTV: Up to 80%
  • Non-recourse options available, subject to carve-outs
  • Our clients receive funding in as little as 1-2 business days.

We understand that real estate projects are laden with obstacles, so our bridge loan process is intentionally hassle-free and concise. Learn more about our proactive loan process here. 

Are Bridge Loans Secured? 

Yes. Bridge loans are typically secured by the borrower’s collateral assets such as other real estate holdings. 

The Appraisal Process

Another appealing feature of Broadmark bridge lending is that we lend based on the anticipated value of your completed project. This supports investors since so many traditional lenders only select candidates with extremely low debt-to-income ratios. We complete an appraisal of the underlying collateral during our underwriting process to ensure our clients are making sound financial investments.  

The Amortization Process

Unlike traditional, long-term loans, most bridge loans focus on interest, rather than a principal amortization. As the borrower, this allows you to focus on your investment and re-paying the full principal amount upon term completion. 

Interest Rates Overview

Interest rates on a bridge loan vary, typically starting around 8%. Keep in mind that while this may feel high at first glance, the intent of a bridge loan is to give a project the capital it needs to get started, stabilize, or reach completion. Then, you can sell and make a profit, or transition to longer term funding while your project’s income stabilizes. There are pros and cons to all types of loan programs, and we suggest connecting with one of our Market Experts to see what type of loan best fits your needs.

A Note on Balance Sheet Private Lending

Investors should note that bridge loans and other real estate loans from private equity firms are very different from getting a traditional bank loan. Broadmark for instance, is a balance sheet lender, meaning the company loans its own money to clients. This model allows for extraordinary flexibility for clients. It also allows for an expedited cash draw process. Many investors appreciate that private lending focuses much less on credit history, and more on the potential value of the investment they seek to make. 

Bridge Loan Summary

Depending on your project, securing a bridge loan can be an excellent way to capitalize on investment opportunities. We understand that when the right moment presents itself, the market doesn’t wait. First time investors, and seasoned entrepreneurs alike lean on bridge loans to piece together real estate projects. With Broadmark’s partnership, our clients often realize above-market returns.  

Contact the Broadmark Realty Capital team to learn more about short-term financing options.

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