Bridge lending is one of the most effective ways to get into tougher projects and provide value add to a property. Interim, or bridge, financing is just what it sounds like, which is to provide a short term bridge to get your project stabilized. Financing, for these projects, are used to buy (or refinance) Office, Retail, Apartments, Industrial, Self Storage properties. Loan sizes will range from 1.5 million to 50 million. The general structure/terms look as follows:
- Acquire a partially vacant building 30 to 70% occupied.
- This property might be run down, mis-managed or abandoned.
- A budget is set up to do “minor” renovations and build out the units so that you can put new tenants in the building.
- Typically you can get anywhere from 65 to 75% loan to cost of the purchase price. Furthermore the lender will fund 65 to 75% of the improvements to the property.
- This means you will need 25 to 35% cash injection for the property.
- Rates can range, depending on market conditions, from 6.5 to 9%.
- The lender will provide a loan for 12 to 48 months of time to improve the property.
- The lender will hold back the improvement funds and disperse them when work is done.
- Generally these are non recourse loans and will cost you 1 to 2.5 points in fees. You are going to pay for an appraisal, environmental, property condition report, ALTA Survey and legal costs.
For further discussion, please contact an Integrity Capital representative at 480-219-1205