Buying, renovating, and then refinancing a property is one of the strategies that property developers generally use nowadays to profit from real estate.
However, this is also a strategy that relies greatly on your ability to think and act fast.
Unless you have unlimited funds to buy and refurbish a property yourself, the chances are high that you will have to find alternative property financing options.
You could get sponsors – but that is easier said than done. Most of the time, you are better off by taking matters into your own hands.
For those who are in the business of real estate development, bridge loans have proven to be quite a good solution.
The demand for them has increased by 39.8% over the past year, and the global interest seems to be growing.
Typically, these loans are used on the short term for financing the purchase of a property before another one is sold.
If you are wondering why a bridge loan is a great choice for your finance, here are a few advantages that come with them:
They are very quick and convenient
When you are into the business of real estate development, you may often be found in need of quick financing for new development.
This is one of the main reasons why you have to consider bridging loans to develop the property.
With this kind of loan, you should be able to raise the capital that you need to buy a new property – particularly if you have to do it fast.
The funds are generally given much faster compared to other loans designed for property purchase (as in, mortgages). You can even get the option to raise all the needed capital through a bridge loan.
They allow you to purchase any kind of real estate property
No matter if you want to refurbish a residential property or a commercial one, a bridging loan will allow you to do so.
Real estate developers use it to buy and develop residential establishments, commercial buildings, retail shops, apartments – and even lands.
If you go for a secured bridging loan, you will secure it against a property that is already owned by you.
If you are the owner of at least one piece of property that does not have any loans secured against it, then you may easily get your hands on a bridging loan.
They are perfect for major property renovation
It takes quite a lot of money to renovate an entire house – a sum that you may not be able to get with an average personal or business loan.
Since most lenders will consider this to be a great risk, there is a chance that they will not give you the money that you seek.
This is why bridge loans can prove to be such a great alternative.
They can cover the renovation costs, and they can make an uninhabitable home look habitable again. At that point, you may refinance using a traditional loan.
They are perfect on the short term
Mortgages can last up to 25 or 30 years – which can be quite troublesome if you want to maintain your real estate business going.
However, a bridging loan is generally given on the short term – from two weeks to 12 months at most.
It is also possible to arrange for longer periods if you are not convinced that you can sell an old property within a year.
You may go for closed or open types of bridging loans – which means that whether you want to stick to fixed payments or flexible ones, the choice is up to you.
As long as you are able to pay back the money that you borrowed, you will be given the ideal solution.
You may want to collaborate with companies such as Property Finance Partners since they have experts that can give you some good free advice. You can find them here: https://www.propertyfinancepartners.com/bridging-loans/
There aren’t any penalties for early payment
How many times have you been penalised on other loans by simply paying off the loan early? With bridge loans, you can pay the loan in full the moment you have the money. Without having to wait until it reaches full term.
So, let’s say that you went for a 12-month loan – but by the 6th month, you have already gathered the funds to pay the rest of the loan in full.
Other loans might penalise you for it – but bridge loans will allow you to pay the money without putting extra taxes on you.
Plus, considering that interest is gathered only while the loan remains, early payment will also save you on the interest.
Bridge loans are a great opportunity to get financing when you are into real estate development. They are fast, they are convenient – and they don’t put as much pressure on you as other loans do. Just be certain that you work with the right lenders during this process.