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Private Investment Property Loans 101

Private Investment property loans also known as Bridge Loans or Short-term Asset Based Loans are useful under specific circumstances when you decide to invest in commercial real estate property—irrespective of whether that is vacant land, subdivision development, apartment complexes or rehab properties.

Knowing when to use them, what to expect and how the loan is typically processed can help you avoid using one in the wrong way.

When to Seek a Bridge Loan?

The most common purpose that investors choose to get a bridge loan in Minnesota is because they need the money to purchase a piece of property as quickly as possible.

  • When you see the best deal ever offered on a property and just don’t dare let it pass you by
  • When weather can cause inspection delays
  • When vacant land requires improvements before building
  • When traditional lenders misunderstand complexities in business plans for expansion
  • When short-term loans are more appropriate to a project, such as rehab projects
  • When you are tapped out at your bank
  • When a property needs repairs or improvements before a conventional loan will accept it as collateral

Bridge loans are also a way to protect your equity in property when you owe back taxes that may cost you all you have invested or when your property gets notice of foreclosure action.

What to Expect from a Bridge Lender

Bridge loans are typically done by private money investors who choose which loans to underwrite and which they have no interest in supporting. Unlike conventional lending institutions, private lenders are more flexible in loan construction. Since no two private loans are identical, there are no cookie-cutter requirements for approval.

The most important component for getting approval is the value of the collateral “after repairs”. This includes updating, land enhancements, taxes and insurance costs.

You should know that the interest rates are going to be higher – closer to credit card interest than mortgage interest rates. However, since the loans are limited to shorter periods – usually maxing out at about 24-months, the interest is not as painful as it would be in a traditional setting.

The Process

Once you decide to put in for funding, you will be asked to fill out two preliminary documents:

  • Loan application
  • Statement of Information

Fill out both documents completely and thoroughly. Leaving information out that you think may hurt your chances for approval will guarantee that you will be turned down. Private money people know that you may have black marks on your credit or that there may be blemishes on the properties record.

These are already factored into any loan assessment so hiding information only makes them question your integrity at Jump Street. After these documents are submitted, you will most likely get a preliminary approval or decline.

Make sure that all documentation you submit is professionally typed and spell-checked for errors as well as comprehensive. Each piece of documentation creates another layer in your file, indicating that you are competent and professional in all your business dealings.

Be able to speak intelligently and in detail about your plan for the loan. Bridge lenders in Minneapolis know the local market well and don’t want or need an overview of the general scope of your project. They want to know that you have done your homework and are prepared to deal with contingency issues and that you really understand the property that you are purchasing. It is usually at this phase when a final decision is made to give you the loan or not.

The final step to receiving the money is inspection and appraisal. If all goes well in this phase without any major snags, you will receive the first draw of the loan within 2-3 days. The entire process can take 2 or 3 weeks from application to receiving the money.

If you need a bridge loan in the Minneapolis area, call us or email us using the “Get More Info” icon in the sidebar.

We fund any type of investment property, vacant land, lake shore, commercial, development and non-homestead flips.

Do you need a Hard Money Loan for your next real estate purchase or refinance fast?