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Bridge Loan Tips from a Minnesota Flipper

Rehabbers – also known as real estate flippers – probably know more about the pros and cons of using bridge loans than any other property investor. Since they need a fast turnover to make a profit, using conventional funding is hardly advantageous.

Here are some tips that our flippers shares.

Define Investment Type

There is no one method of flipping property that is best for all and each type of investment: foreclosures, short sales, private owner or rental properties – each have their own particular quirks.

Foreclosures, for example, nearly always are in really bad shape when you get them. Fixtures, electrical outlets, amp boxes, and appliances are literally ripped from the wall. Toilets, tubs and sinks – if they are still on the premises – are broken with hammers, stuffed with paper. The sheet rock, stairways and windows have been ripped down.

Short sales take longer to close and when you buy a property on short sale, both the bank and homeowner have to approve your offer.

Private owners always think that their property is worth more than it is and that they should not be penalized in the sale because you have to update the kitchen, bath and fix everything that is wrong with the house and the property.

Rental properties such as apartment houses or condos come with their own foibles. If you have to fix the entire structure, it could involve forcing tenants to move temporarily or permanently while the repairs are made. It could mean that you need to repopulate it to get the biggest bang for your investment buck.

HUD flips require using an authorized realtor from the HUD program and there is always additional paperwork involved. The one advantage in choosing this type of investment to flip is that you get a reputation as an experienced flipper.

By choosing one type of investment property to focus your attention on, you earn a reputation among bankers and bridge lenders as the best in your field.

Investment Property Loans

Regardless of which type of property you decide to flip, unless you have unlimited funding in your personal wallet you will need an investment property loan. And, no matter how well established you are with a bank, getting a loan to purchase and repair a property is going to be limited.

These are the reasons to use a bridge loan:

  •      The property is a disaster and the bank thinks it needs to be bulldozed rather than rehabbed
  •     Conventional loans don’t provide any money for necessary repairs or updates
  •     Your loans from your reliable banker just dried up
  •     Your family has no more cash to send your way to purchase another property
  •     Your turnaround time is very short – from purchase to market to sale in under 6 months
  •     Once you have established yourself with a private money lender, you could get the first draw within hours instead of days or weeks

There are two reasons that you should never consider a bridge loan:

  1. if you know that the property is going to be hard to sell or get a traditional loan on in less than a year due to its location or size
  2. 2.if you are purchasing a commercial property to hold for a long time – such as a rental property unless you have conventional financing ready to take over in 6-months to a year.

Email or Call Us

If you are a flipper and need a loan on an investment property fast, give us a call or email us through the “Get More Info” icon in the sidebar. We fund investment properties up to $3 million. We also purchase deed contracts and real estate notes.

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