Bridge Loan for first BRRRR

[Kristin Riker]

Hello All,

I'm looking to do my first BRRR deal in Tampa and the lender I have found is suggesting a bridge loan (I would pay for rehab separately) then refinance into a 30 year fixed mortgage in approximately 4-6 months. I don't know ANYTHING about bridge loans....Pros/Cons?? I understand they are typically a higher rate and you must refinance within a year. Is this common practice for BRRRRs?

Thanks for any insight...

[Ash Hegde]

Bridge loans, like hard money loans, are meant to be short term financing for something like a BRRRR. You are correct that they are a higher rate and the goal is to refi out as soon as possible. Did you want to pay for your own rehab or does this loan not fund rehab expenses? That's the only part that seems a little off - the hard money lender we use will pay for rehab costs.

[Kristin Riker]

Hey @Ash Hegde I have enough capital to finance rehab so that isnt a concern for me

[Jared Hottle]

I do not think the is the purpose they were designed for but seems like it could work if you have the money for the rehab. I believe their main purpose is to allow someone to buy a house before needing to sell their current house. Every bank is different and maybe they just are more comfortable with bridge loans then say a construction loan or an interest only 1 year note a lot of them are all the same thing just make sure you are up front and honest with the bank on what your plan is, make sure you have enough for rehab and you should be good.

[Brennen Thompson]

Hi! 

Depending on the rate I would also look into hard money. Rates are high right now (about 12% with lower experience), but similar to what Ash said it might make things easier if you're able to use the lenders cash for the rehab. I know that you said that you've got enough to cover it, I just like to have more cash on hand than less given the current state of the market. Rehabs can also take a little longer or cost a little more than we think so having the extra cash on hand helps me sleep at night. 

If you need any hard money recos feel free to DM me, we work with them pretty regularly! 

[Erik Estrada]

Quote from @Kristin Riker:

Hello All,

I'm looking to do my first BRRR deal in Tampa and the lender I have found is suggesting a bridge loan (I would pay for rehab separately) then refinance into a 30 year fixed mortgage in approximately 4-6 months. I don't know ANYTHING about bridge loans....Pros/Cons?? I understand they are typically a higher rate and you must refinance within a year. Is this common practice for BRRRRs?

Thanks for any insight...

 A bridge loan is a great tool to get yourself into a property that is distressed and you plan on doing rehab work to make it habitable. Typically the terms are for 1 year, interest only, offer rehab financing, and carry a balloon at the end. Your exit strategy is either to sell the property or refinance the loan into fixed payments for a rental property. 

I am seeing some lenders do 9.5-9.99% in Interest for bridge loans. 

[Stephanie P.]

Quote from @Kristin Riker:

Hello All,

I'm looking to do my first BRRR deal in Tampa and the lender I have found is suggesting a bridge loan (I would pay for rehab separately) then refinance into a 30 year fixed mortgage in approximately 4-6 months. I don't know ANYTHING about bridge loans....Pros/Cons?? I understand they are typically a higher rate and you must refinance within a year. Is this common practice for BRRRRs?

Thanks for any insight...

 Not sure if you got your financing yet, but I would look into a product that covers about 80% of the purchase and 100% of the rehab.  Save your cash.

Also, watch your seasoning times.  Most companies require at least 6 months on title before allowing a refinance using the new appraisal.