Want to take advantage of great chances in the multifamily real estate market that’s on the rise, but can’t get traditional financing? The apartment sector continues to demonstrate its strength. Rents are expected to rise, while demand is expected to remain stable in 2025, despite an increase in supply. This market is highly active and presents excellent business opportunities.
This is where short-term loans come in. Bridge loans are a short-term form of financing designed to “bridge the gap” between immediate financial needs and the availability of longer-term, more stable funding. They are essential for buyers who need to access money quickly to capitalize on time-sensitive opportunities.
Our company is a dedicated Multifamily Lender with 30 years of experience as an underwriter, focusing on financing for multifamily real estate. We can help you obtain the funds you need in various ways by acting as both a messenger and a table lender.
This blog will tell you about the “best bridge loan lenders” and explain how these critical short-term loans can help you reach your real estate goals. We will help you understand the complicated world of bridge loans and find answers for your multifamily investment property. Are you ready to dive into the world of new ways to finance real estate? Let’s look around!
What Exactly is a Bridge Loan?
How do Bridge Loans Work?
At its core, a bridge loan is a short-term loan designed to “bridge” the financial gap between two transactions. In real estate, this usually means giving money right away to buy a house or fix it up until more stable, long-term financing can be found. It helps buyers make plans when they need to act quickly in a constantly changing market.
Why Use Bridge Loans?
Investors leverage bridge loans for a variety of critical reasons:
- Quick funding for investment property purchases: Being able to close quickly can mean the difference between getting a good deal and missing out in a competitive market. Bridge loans let you get money quickly, which is something that regular loans can’t do.
- Capital for ground-up construction, renovation, rebuild, fix-and-flip, fix-and-hold, and fix-and-rent projects: For these kinds of jobs, quick cash is often needed for materials, labor, and the first stages before a long-term construction or permanent loan can be gotten.
- Overcoming timing issues in the real estate market: When you need to close on a new property before your old one sells or take advantage of an off-market chance, bridge loans give you the cash you need to get through tight deadlines.
Key Characteristics of Bridge Loans
There are a few main ways that bridge loans are different from regular mortgages:
- Shorter repayment terms: In contrast to a 15- or 30-year mortgage, bridge loans typically have repayment terms of 6 to 24 months. Some, though, can last up to three years.
- Often features interest-only payments: During the loan term, many bridge loans are set up so that the borrower only has to pay interest. This helps them maintain a steady cash flow until the property is sold or refinanced. At the end of the time, the principal is paid back all at once.
- Typically, it requires an exit strategy: Lenders will always want to see a clear “exit strategy”—a plan for how the borrower will repay the bridge loan. Typically, this means selling the house or obtaining long-term financing, such as a standard mortgage or a refinance.
Comparison to Traditional Mortgage
Bridge loans are preferable to standard mortgages because they can be utilized quickly and in various ways. A typical mortgage application can take 30 to 60 days or longer to process. However, bridge loans are often accepted and paid out within just a few days or weeks, allowing investors to take advantage of opportunities that require prompt action. There is a cost to this speed and flexibility. However, bridge loans typically have higher interest rates than standard mortgages because they are shorter-term and the lender perceives them as posing a higher risk. Additionally, they may have higher upfront fees.
Who Needs a Bridge Loan in Multifamily Real Estate?
Are Bridge Loans Right for Your Multifamily Investment?
Bridge loans are a flexible way for individuals and businesses operating in the fast-paced multifamily real estate sector to obtain money. They are great for a lot of different situations because they are flexible.
For Investors
Bridge loans are a game-changer for multifamily investors looking to:
- Rapid property acquisition for multifamily apartment buildings: When a great rental property comes on the market, you need to act quickly. Investors can soon purchase a property with a bridge loan, before other buyers move in, ensuring they don’t miss out on good deals.
- Capitalizing on distressed properties or quick deals in the real estate market: Properties that are in bad shape often have short close dates. Bridge loans provide investors with the fast cash they need to purchase these properties, which are usually priced below market value. They can then increase the worth of the properties by renovating or repositioning them.
- Financing a fix-and-flip or fix-and-hold strategy for multifamily investment properties (1-4 units, 5-10 units, etc.): These strategies need quick access to capital for repairs and improvements, no matter if it’s a duplex, a small apartment complex, or even a bigger group of homes. Bridge loans give you the money you need to fix up these properties and raise their value so you can sell them quickly (fix and flip) or rent them out for a long time (fix and stay).
For Developers/Builders
Developers and builders also find bridge loans indispensable for:
- Ground-up construction or significant renovation projects: Before obtaining long-term building loans, bridge loans can cover initial costs, such as purchasing land, obtaining permits, creating architectural plans, and performing preliminary site work. This helps keep projects on schedule.
- Needing a line of credit for immediate project costs: As a temporary line of credit, they let you get money quickly for unplanned expenses or to keep a project moving forward without having to wait for regular loan draw dates.
For Brokers (and aspiring ones)
Real estate agents who work with multifamily properties need to understand bridge loans to serve their clients better. Brokers who are knowledgeable about bridge loan options and can assist clients in setting them up are invaluable, as they help clients overcome financing challenges and close deals more quickly. Our full range of financial advising services can provide individuals seeking to become real estate brokers with the in-depth knowledge of various loan types, such as bridge loans, that they need to succeed in the field.
Real-world Scenarios
- Imagine you’ve found the perfect multifamily property, but your traditional mortgage is still being processed. With a bridge loan, you can close the deal right away, giving you time to get your long-term finances in order so you don’t lose the house to someone else.
- You have a fantastic fix-and-flip project for a 5-unit investment property. Still, you need quick access to capital for renovations. A bridge loan gives you the money you need right away to start making the improvements you need to make. This way, you can complete the project on time and maximize your earnings.
Key Factors When Choosing the Best Bridge Loan Lenders
What to Look for in the Best Bridge Loan Lenders
Finding the right bridge loan lender is significant for the success of your rental property business. Not every loan is the same, and understanding the key factors will help you make an informed choice.
Loan Amounts and Terms
Bridge loans are available in a wide range of loan amounts to accommodate projects of all sizes, from small multifamily properties with one to four units to large apartment complexes. The loan terms for these short-term loans typically range from 6 to 24 months. However, some can last up to 36 months, especially for larger projects such as building from scratch or relocating items. The exact loan amounts and terms will vary significantly depending on the loan lender, the type of property (such as raw land versus a stabilized apartment building), the borrower’s experience, and the project’s strength.
Interest Rates and Fees
It’s essential to note that the interest rates on bridge loans are typically higher than those on standard, long-term mortgages. This is because they don’t last long, they can be funded quickly, and the risk is often seen as higher. Besides the interest rate, you’ll also have to pay other fees. Usually, these include:
- Origination fees: A percentage of the loan amount, often ranging from 1% to 5% or even higher, paid at closing.
- Closing costs: Standard real estate transaction costs like appraisal fees, legal fees, title insurance, and recording fees.
- Potential extension fees: If your project takes longer than anticipated and you need to extend the loan term, lenders may charge an additional fee.
Transparency regarding all costs is crucial. A reputable lender will provide a clear breakdown of all fees upfront, ensuring there are no hidden surprises.
Underwriting Expertise and Speed
Because many multiple real estate deals need to be completed quickly, the speed at which the loan is approved and funded is the most important consideration when seeking short-term financing. Look for lenders that have a straightforward process and a proven track record of closing deals quickly. This speed is often a direct result of how well the loan does its underwriting. With 30 years of experience as an underwriter, our company possesses extensive knowledge of multifamily real estate, enabling us to evaluate deals and facilitate faster decision-making and payment processing.
Flexibility and Customization
The best bridge loan lenders are flexible and can make changes to fit the needs of each project. This means providing a range of bridge loan options and flexible payment plans, such as interest-only payments, which can significantly assist with cash flow during renovation or stabilization. A lender’s understanding of the various challenges and opportunities in multifamily real estate is demonstrated by their ability to tailor loans to specific project needs, such as new construction, fix-and-flip, or fix-and-hold plans.
Reputation and Track Record
Before agreeing to work with a lender, thoroughly research their name and past performance. Read reviews, testimonials, and industry sites to find out what other people have said about their honesty, customer service, and how reliable they are. Give priority to loan providers that have a track record of successfully funding apartment real estate deals. In addition to loans, a lender with much knowledge in your market or type of property can also give you helpful advice.
Bridge Loan Requirements
While bridge loan requirements can be more flexible than traditional mortgages, there are still key criteria lenders evaluate:
- Property Type: Lenders focus on different types of assets, so ensure the one you choose has experience with the kind of multifamily property you own (for example, garden-style flats, high-rise apartments, or student housing).
- Credit Score: Although the requirements aren’t as strict as those for traditional mortgages, a good credit score (usually 680–700+) is still recommended, as it demonstrates your financial responsibility. However, for experienced investors, some private lenders may be more concerned with the asset and how the investor plans to exit the deal than with the borrower’s credit history.
- Clear Exit Strategy: This is perhaps the most crucial condition. Lenders need to understand how you plan to repay the bridge loan. This could be by selling the house, refinancing into a longer-term loan, or some other clear financial event. Obtaining a bridge loan will be challenging if you don’t have a solid repayment plan in place.
- Debt-to-income ratio (DTI) considerations: Some lenders may look at your DTI to figure out how much money you can afford overall, though it’s not always as strict as with a traditional mortgage. This is especially true for smaller loans or people who haven’t borrowed money before. However, for many business bridge loans, the value and potential of the asset are crucial.
Types of Bridge Loans for Multifamily Properties
Beyond the Basics: Exploring Diverse Bridge Loan Options
A bridge loan’s primary purpose is to provide short-term financing. However, there are various types of bridge loans available in the multifamily real estate market, each designed to meet the specific needs of different investors and projects. It is essential to understand these differences to select the most suitable financial tool.
Traditional Bridge Loans
In my opinion, these are the best “bridge the gap” financing options. They give you cash right away for a short time, usually between 6 and 24 months, so you can buy a house or pay for things while you wait for permanent financing to come through. They are flexible and are used in a lot of different multifamily investment situations.
Hard Money Loans
As an asset-based loan, hard money loans are a type of bridge loan. This means that the lender is more interested in the value of the collateral property than in the borrower’s credit score or regular income. This makes them an excellent choice for investors working on “fix-and-flip” projects that require quick completion, as the property may not be eligible for conventional financing due to its “as-is” condition. Most of the time, they have higher fees and interest rates because the lender is taking on more risk.
DSCR Loans
Debt Service Coverage Ratio (DSCR) loans are gaining popularity for purchasing investment properties, particularly multifamily properties. Traditional loans look closely at a borrower’s income and debt-to-income ratio. DSCR loans, on the other hand, focus on the property’s ability to generate sufficient revenue to cover the mortgage payments. Let’s say that the property’s expected rental income is enough to pay off the debt. Then it might be possible to secure financing, which makes them ideal for investors seeking to purchase assets that generate cash.
Construction Loans (short-term phase)
These loans are made for constructing a home from scratch or making significant changes to an existing one. They give money in stages, or draws, as the construction process goes on. A short-term loan for construction will often change into a longer-term loan once the project is finished and stable, or it will be paid off with a permanent refinance. For example, FHA construction loans can be a suitable choice for some multifamily developments because they have specific terms and requirements backed by the Federal Housing Administration.
Lite-Doc & No-Doc Loans
Lite-Doc (light documentation) and No-Doc (no documentation) loans are designed to be quick and easy. They require little paperwork about the borrower’s finances. Even though they offer fast approval and funding, they usually have higher interest rates and origination fees to compensate for the fact that underwriters don’t scrutinize the loan as closely. One type of loan, state income loans, may allow borrowers to qualify based on self-certified income, making the application process even easier for confident investors.
Other Specialized Loans (Brief mention as alternatives/related)
Even though they aren’t exactly bridge loans, the following specialized financing options can be used for similar short-term goals or to go along with bridge loans in some situations:
- SBA loans: There are times when Small Business Administration (SBA) loans include components that can be used as bridge financing for purchasing or renovating a commercial property. However, their primary goal is to expand the business as a whole.
- USDA B&I Loans: The USDA Business & Industry (B&I) loan provides money for constructing multifamily residences in certain rural areas. Although they are mostly long-term, they can be set up in a way that meets short-term funding needs during the initial stages of growth.
- FHA commercial property investment loans: Like FHA construction loans, these can be used for a variety of business properties, such as multifamily buildings. They may have short-term phases before switching to permanent financing.
Our Approach: Why We Are Among the Best Bridge Loan Lenders
When it comes to financing multifamily properties, having a partner you can trust and who has extensive experience is very helpful. We’re proud to be one of the “best bridge loan lenders” in the business. Our approach is grounded in extensive experience, substantial resources, and a strong commitment to seeing our clients succeed.
Our 30 Years of Underwriting Expertise
We have 30 years of experience as underwriters, which gives us a deep understanding of the multifamily real estate market. It’s not enough to process applications; you need to fully understand how the market works, how to value properties, assess risk, and devise effective exit strategies. With extensive knowledge of these projects, we can quickly and accurately evaluate them, devising tailored financing solutions that meet the specific needs of each deal.
Correspondent and Table Lenders
Our clients benefit a lot from the fact that we are both correspondent and table lenders. As a correspondent lender, we directly originate, underwrite, and fund loans. This gives us more control over the whole process, which often means that we can close loans faster and offer more flexible terms than traditional banks. We can also obtain loans directly from various programs. As a table lender, we can fund loans directly from our capital, which speeds up the process even more and makes us less reliant on outside parties. This two-in-one skill ensures that your projects are carried out quickly and easily, and provides you with a direct line to funding.
Vast Network
Our extensive network of over 200 private lenders and real estate investors gives us a competitive edge. This vast network offers access to a diverse range of financing options and capital sources. Our network enables us to identify the best and most affordable funding options for your project, even if it has special requirements such as unique terms, a specific type of property, or a complex situation.
Tailored Financial Consulting Services
In addition to providing our clients with financial resources, we believe in empowering them to achieve their goals. We offer full financial consulting as part of our services. Not only do we lend money, but we also provide expert advice and guidance to help you make informed choices. We work closely with our clients to help them understand the complex world of financing for various types of multifamily properties and strategies, including building from scratch, renovating, rebuilding, fix-and-flip, fix-and-hold, and fix-and-rent. With our assistance, you can be confident that your financing will help you achieve your investment goals.
Flexible Referral Programs
Strong partnerships are essential to us in the real estate business. That’s why we offer brokers a choice of flexible referral programs, with both exclusive and non-exclusive options, regardless of their level of industry experience or newness. Our goal is to foster relationships that benefit everyone and yield positive outcomes for all parties involved.
Focus on Client Success
Our primary goal is to help our clients achieve real success. A bridge loan is often only one part of a bigger investment plan, which is something we understand. We aim to be your trusted partner in your multifamily real estate journey, offering bridge loans and a comprehensive range of financing options, and possessing a deep understanding of the market. This will help you reach your financial goals and realize your real estate dreams.
From Application to Closing: Your Bridge Loan Journey
Applying for a bridge loan from our company is designed to be quick and straightforward, allowing you to obtain the funds you need promptly.
The first step in our streamlined application process is to learn about your project and determine the amount of funding you require. We focus on being efficient and leveraging our years of experience to quickly determine if a deal is a good one.
Borrowers usually need to provide essential documents during the application process. These include detailed information about the property, a comprehensive exit strategy plan that explains how the short-term loan will be repaid, and a brief financial overview of the borrower’s situation.
Getting the money is usually much faster than with traditional financing. Depending on the complexity of the deal and the completeness of your paperwork, it can take as little as a few days or even a few weeks.
There are not enough good things to say about having a way out. It is essential to have a clear plan for paying back the bridge loan. This could involve obtaining a regular mortgage, selling the house, or taking on long-term debt that aligns with the needs of the stabilized asset. We’re here to help you make sure your exit plan is strong and easy to understand.
Bridge Loan Alternatives & Long-Term Vision: We Can Help!
We recognize that bridge loans may not always be the best choice, even though they are quick and can be utilized for specific short-term needs. For individuals who don’t require immediate funding and prefer a more traditional approach, we also offer conventional financing options with competitive long-term rates.
It is essential to remember that bridge loans are intended for temporary use until you can secure a permanent term loan for your multifamily property, which typically occurs once it is fully developed or stabilized. We offer more than just short-term loans as part of our full-service financial advice. We help you create a comprehensive, long-term economic plan that aligns with your overall investment goals in the multifamily real estate market, which is constantly evolving.
Conclusion
In the multifamily real estate market, where things move quickly and there are lots of opportunities, bridge loans are helpful because they give you speed and flexibility that traditional loans don’t always offer. Choosing the “best bridge loan lenders” isn’t just a matter of taste; it’s essential for your business because it helps you close deals quickly, pay for repairs, and fill in gaps in your finances.
For 30 years, we’ve been underwriting loans as both correspondent and table lenders, and we work with an extensive network of over 200 real estate investors and private lenders. This makes us stand out. We don’t just offer short-term loans; we also provide personalized financial advice to help you achieve your investment property goals.
Are you ready to begin your role as a multifamily real estate agent? Let’s talk about money right away to get a free quote and learn how our bridge loan options can help your next investment grow. It makes us happy to help real estate investors across the US access the funds they need to succeed.
FAQs
Q1: What is a typical credit score needed for a bridge loan, and how does it compare to traditional mortgages?
A1: Even though bridge loans are often more flexible than mortgages, it’s still a good idea to have good credit. Many lenders require a credit score of 700 or higher. Still, some may accept lower scores if the property is strong, you have enough equity, and you know how you’re going to get out of the deal. Bridge lenders don’t just look at your credit history or debt-to-income ratio like traditional mortgage lenders do. They also look at the property itself as collateral and your clear plan to repay the loan.
Q2: Can the interest paid on a bridge loan for an investment property be tax-deductible?
A2: In most cases, yes. Usually, you can deduct the interest you pay on a loan used to buy, fix up, or hold an investment property, such as a multifamily rental property. Even so, the home has to be rented out or available for rent during the year the deduction is made. Always talk to a qualified tax professional to find out what the tax effects will be for your specific situation.
Q3: What are the main risks associated with taking out a bridge loan?
A3: Higher interest rates and fees compared to traditional financing are the main risks. This can increase the total cost of your project. The most significant risk, however, is that your exit strategy may not be effective. If the house doesn’t sell or you can’t get long-term financing when you planned, the bridge loan and possibly other debts could put a strain on your finances. This illustrates the importance of having a clear and attainable plan for exiting the business.
Q4: Is it possible to refinance an existing bridge loan?
A4: Yes, it is often possible to get a new bridge loan to pay off an old one. This is sometimes referred to as “re-bridging.” This might be necessary if the project takes longer than planned to complete, if market conditions delay your planned exit strategy (such as selling your house), or if you require additional time to secure permanent financing. Keep in mind, however, that refinancing a bridge loan may incur extra costs and have different terms.
Q5: What factors influence how quickly a bridge loan can be approved and funded?
A5: The speed of approval and funding is affected by several things. Some of these factors include the completeness and accuracy of the paperwork you submit, the clarity and strength of your exit strategy, the lender’s internal processes and underwriting capabilities (where our 30 years of experience truly shine), and the complexity of the transaction itself. Depending on the amount of work required, some bridge loans can be funded within a few days, while others may take several weeks to complete.