Short-Term & Bridge Financing: Temporary Funding for Real Estate Investors
Real estate deals often require fast access to capital, especially when traditional financing isn’t immediately available. Short-term or bridge financing provides temporary funding to bridge the gap between purchasing a property and securing permanent financing, ensuring investors can act quickly and seize opportunities.
What Is Short-Term/Bridge Financing?
Short-term or bridge loans are temporary loans designed to provide immediate capital for real estate transactions. They are ideal when an investor needs to close quickly on a property but plans to refinance with a long-term mortgage or sell the property soon after.
Key Features:
Typically short-term (6–24 months)
Covers purchase price and sometimes renovation costs
Fast approval and funding compared to traditional loans
Designed to be replaced by permanent financing or resale
Typical Interest Rates & Loan Structure
Interest Rates: Usually range from 7% to 15%, reflecting the short-term nature and higher risk of bridge loans.
Loan Term: Generally 6–24 months, depending on the anticipated timeline to secure permanent financing.
Loan Type: Falls under hard money or short-term real estate financing, secured by the property itself.
Repayment: Often interest-only during the loan term, with principal repaid when permanent financing is obtained.
When to Consider Short-Term/Bridge Financing
Quick Property Acquisition: Close on a property before permanent financing is available.
Property Renovation: Fund renovations before refinancing or resale.
Transitional Financing: Bridge the gap between selling an existing property and purchasing a new one.
Market Opportunities: Act fast on competitive deals that require immediate capital.
Example: An investor purchases a multi-family property with a bridge loan, renovates it, and then refinances with a conventional mortgage once tenant leases are secured.
Benefits of Short-Term/Bridge Financing
Speed: Quick access to capital to secure time-sensitive deals.
Flexibility: Can cover purchase and renovation costs.
Opportunity Maximization: Allows investors to act on profitable deals without waiting for traditional loan approvals.
Leverage: Use borrowed funds to control property while arranging permanent financing.
Risks of Short-Term/Bridge Financing
Higher Interest Rates: Short-term loans typically cost more than traditional mortgages.
Repayment Pressure: Principal must be repaid or refinanced within a short period.
Market Risk: Property values may fluctuate, affecting refinancing or resale outcomes.
Additional Fees: Some bridge loans include origination, appraisal, and exit fees.
Strategic Use of Short-Term/Bridge Financing
Ensure a clear exit strategy, such as refinancing or selling the property.
Align the loan term with the anticipated timeline for permanent financing.
Budget for interest, fees, and contingencies to avoid cash flow issues.
Target properties with strong resale or rental potential to minimize risk.
Is Short-Term/Bridge Financing Right for You?
If you’re a real estate investor needing temporary capital to act quickly, short-term or bridge financing can provide the funds necessary to secure properties, fund renovations, and bridge the gap to permanent financing. With proper planning and an exit strategy, these loans can be a powerful tool for growth.
At Libiano Partners, we connect investors with lenders offering flexible short-term and bridge financing solutions to meet your real estate goals.
Fill out our intake form today and let Libiano Partners help you secure the right short-term or bridge loan to fund your next real estate investment.
