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Also known as commercial mortgage bridge loans, these commercial real estate loans are a form of short term financing used to purchase commercial properties or upgrade existing commercial properties when permanent financing is not available. This type of loans usually comes in handy for those who are looking to invest in commercial real estate on a buy-and-renovate basis.
Usually, traditional commercial real estate lenders will give out loans based on current Loan to Value (LTV) but for commercial bridge loan providers, they are providing financing based on the After Repair Value (ARV). This is a riskier move for these lenders but can pay off big when the borrower has a solid renovation plan for a property that can yield a high ARV. That’s why when commercial bridge loans are given, the lender will not only evaluate the property in question and the property market but also the renovation plans.
Qualifying requirements vary from lender to lender but you can find some similarities between how different lenders consider applicants for a commercial bridge loan. For example, the borrower should have a credit score of 650+, a net worth that is equal to requested loan, and prior success in previous projects will be extremely helpful. The property should feature a debt service coverage ratio (DSCR) of around 1.1 to 1.25. The borrower will also have to submit documentation which include 2-year tax returns, financial statements, lease schedules, expense statements for the property, renovation cost breakdown, action plan, and more.
The best time to consider for a commercial bridge loan is when you are looking to upgrade and renovate a property while handling the purchase of the said property. Whether it’s a multi-family complex or an office building or retail property, the commercial mortgage bridge loan can help you to buy the property and improve it, and you can sell it off later for a profit or use the enhanced equity to apply for permanent financing down the road.
If you are looking for a commercial bridge loan in New York, New Jersey or Pennsylvania, LP Capital Group can help. We offer innovative Bridge Loan Programs for both transitional and stabilized commercial real estate assets so contact us today and find out more.