Real estate investors and property developers alike now find themselves in a highly competitive market fueled by a resurgent economy and higher property values. As such, remaining competitive means always having the resources at hand to move forward when opportunity calls. Bridge loans are among those resources.
Actium Partners, a Salt Lake City hard money lender that provides bridge loans to property investors, maintains that bridge funding should be part of every property investor’s resource strategy. Bridge loans provide access to fast cash so that investors can move quickly whenever necessary.
Bridge Loans Offer Flexibility
Bridge loans are obviously not going to be the only funding option for property investors. For example, a developer still needs access to construction loans on a regular basis. Residential landlords still need access to mortgages and remodeling loans. Bridge loans prove indispensable at those times when property investors need flexibility and fast cash.
Applying for a loan through a bank could mean a process that takes up to 60 days to complete. Such long timeframes do not allow for investors to move quickly. Moreover, they are at the mercy of banks who don’t necessarily have their interests at heart. On the other hand, applying for a bridge loan through a private lender like Actium Partners means a much faster application and underwriting process.
Bridge Loans Are Short-Term
While most people would view borrowing hundreds of thousands of dollars as a long-term proposition, bridge loans are purposely designed to be short term. This can be attractive to property investors under the right circumstances. A short-term loan, while it does come with higher interest rates, ends up costing less in the long run because it is paid off more quickly.
Remember that the primary purpose of a bridge loan is to provide cash to meet immediate needs. Bridge loans are taken out with the understanding that future revenues are coming, revenues that will go toward paying off the loan.
Bridge Loans Keep Investors Competitive
If investors need one overriding reason to keep bridge loans in their financial resources toolbox, competition provides that reason. Bridge loans help investors maintain a competitive edge in what is a highly competitive industry. Property investing is one venture where money really does talk.
Consider a land developer who does not have access to fast cash. A golden investment opportunity comes up and he heads off to the bank for yet another loan. Meanwhile, one of his competitors contacts a private lender to apply for a bridge loan. Given the way banks and private lenders operate, who do you think will have the cash in hand more quickly?
The investor who went to the private lender is more likely to be approved first. He is likely to be ready to move on that opportunity in a matter of weeks while the other investor plays games with the bank. If the bank is especially slow, he might still be waiting for an answer while the competition has already closed the deal.
Understanding Bridge Loans
Also known as hard money loans, bridge loans are a valuable tool to property investors. But lest you get the wrong impression here, they are not the appropriate funding solution for every problem. Bridge loans are a very specific kind of funding with limited use.
Note that bridge loans are like any other financial product in that they vary from one lender to the next. So it is not enough just to have access to hard money. Investors should make a point of developing relationships with hard money lenders they know they can trust.