How Bridge Loans Make Property Acquisitions Easier in South Florida

South Florida is a prime location for investing in commercial real estate. Properties ripe for acquisition and rehabbing abound and the demand for real estate is high. The key to success is finding the financing you need when you need it. HML Solutions provides loans for property acquisitions and renovations. These bridge loans give you short-term financing up to three years, after which you can refi or sell the property.

How Investors Can Use Bridge Loans

Bridge loans are commonly used to finance the acquisition of and improvements to multifamily housing. If an investor purchases a 90 percent occupied property with the intention of updating the kitchens and baths, these renovations will have to be done over time. 

The bridge loan allows the renovations to move ahead while the owner organizes long-term financing. When they are finished, the property has more value and the owner can raise rents, making the property more attractive for long-term financing options.

Loans insured by the U.S. Department of Housing and Urban Development are an excellent way to finance a property in South Florida. The main drawback is that they can take a long time to get. A typical time frame for a HUD loan from application to receipt of money is four to six months. That’s just too long for some developers to wait.

A bridge loan can be used for the purchase of the property and paid off when the HUD loan comes in. This enables investors to move quickly on great properties when they show up on the market. HML Solutions will even underwrite the HUD loan application as a part of the process.

Bridge loans are great tools for investors utilizing the Low-Income Housing Tax Credit in South Florida, which can take a year to complete. They can also be used to hold a property while the owners evaluate the resell market. In short, any time an investor needs money quickly, a bridge loan fills in the gap.

Bridge Loan Guidelines

Because bridge loans typically include underwriting for long-term financing, they have similiar credit criteria to other commercial loans. For example, HML Solutions will evaluate factors such whether the market can support a rise in rents. It’s important to ensure that investors can secure permanent, long-term financing at the end of the bridge loan.

Investors are usually required to have 10 to 20 percent equity in the project. You will also need a solid business plan and a good net operating income. If you will be adding value through renovations or raising rents, these things will also factor into the loan.

HML Solutions offers great terms and conditions on bridge loans in South Florida. Most are adjustable-rate mortgages where you will make interest-only payments. If you pay off the loan early, you only have to pay six months interest with a one to two percent exit fee.

If you want excellent leverage for your next property acquisitions, get a bridge loan from HML Solutions. They give investors the time and money they need to bridge the gap between finding the deals and financing the deals.

Using Bridge Loans for Value-Add Investments in Florida

Although bridge loans often get an unfair bad rap, they are good tools for helping investors obtain value-add properties. In Florida, these lucrative real-estate opportunities are getting harder and harder to find, and securing a bridge loan allows you to jump on a property as soon as it becomes available. The current economy has driven up the price of most homes in metro cities around America, and while this is wonderful for the nation, it makes it difficult for investors to turn a profit on their properties. Having the right financing in place is a key strategy for obtaining value-add properties.

What Bridge Loans Can Offer

Contrary to popular opinion, bridge loans are not hard money loans. This avenue of financing is a short-term loan that often only lasts 12 months, but it bridges the gap in equity that is caused when cap rates are reduced and property prices rise. While borrowers need more money to close real estate deals, lenders become more conservative because they are not sure they will recoup their money. Bridge loans allow borrowers to finance up to 85 percent of property costs so that they have the chance to add value to their properties and earn a profit by selling.

Bridge Loans Vs. Permanent Financing

Permanent financing often provides borrowers with up to 80 percent of the funding they need. This rate is rare in the current market, but bridge loans with up to 85 percent financing are still readily available. For investors who focus solely on rate, bridge loans may seem like a risky venture, but if you want the opportunity to expand your acquisitions in the future, bridge loans are a good investment. This avenue of financing comes with the following advantages.

  • Flexibility: Bridge loans give you additional purchasing power so you can find properties that will turn a decent profit.
  • Speed: Bridge loans are often approved more quickly than other types of financing.
  • Convenience: Bridge loans allow you to purchase real estate as it becomes available rather than the sale being contingent upon selling another property.

Determinning If a Bridge Loan Is Right for You

Like any financial solution, bridge loans are not right for everyone. If you plan to use this type of financing to add value to a property and turn a profit, you must have a plan in mind to make your investment a success. A bridge loan is inherently risky, so if you want a structured 10-year loan that you know will pay off, this avenue of financing is not right for you. However, as a calculated risk, bridge loans offer substantial potential rewards.

A bridge loan can be useful for securing value-add property in Florida. While property is scarce, bridge loans provide investors with the funds they need to make quick decisions on buying without the contingency of selling another piece of real estate. If you want a flexible financing solution that will equip you to take big financial risks in exchange for payoffs that have the potential to be significant, a bridge loan could be perfect for you. Contact HML Solutions today to discuss your options.

5 Big Reasons to Use Bridge Loans for Commercial Property in West Palm Beach

With cap rates lowering and many lenders reducing leverage for their loans, bridge loans have become a popular avenue of financing that allows investors to obtain and renovate real estate to turn it into value-add property. This makes bridge loans a valuable tool for receiving lucrative returns on property investments. Here are five ways bridge loans are beneficial for helping investors obtain commercial property.

1. Big Box Retailer Availability

The rise of technology has revolutionized the way consumers shop. Instead of spending hours traipsing through a big box retailer filling their carts, people can find the items they need online with just the click of a button. This shift to online retail has caused many companies to close physical store locations, and these properties provide a huge opportunity for investors. In some cases, a bridge loan even covers 100 percent of the property’s cost so that the borrower can focus on transforming the unused space into a trendier property.

2. Construction Loan Takeout

Overbuilding has become a common problem with many office buildings and multi-family properties. Bridge loans provide the financing necessary for construction, but the payouts are almost always reserved for products that are almost finished. This removes the risk to lenders.

3. Bridge-to-Perm Loans

HUD loans are beneficial for financing commercial properties, but they often take a while to process. Investors risk losing the property in question if they wait for HUD financing to be approved, so a bridge loan is a solution that offers quick financing until the permanent funding is in place. This is the most common reason bridge loans are utilized for commercial properties,

4. Value-Add Properties

Any piece of real estate that is renovated to sell for a higher price than was paid for it is considered a value-add property. The payoff has the potential to be lucrative, but you must have a plan in mind as to how you will make the property turn a profit. A bridge loan provides you with extra financing to complete necessary renovations. The amount of the loan will likely be paid off by the time the renovations are complete, freeing you to sell the property for a higher price.

5. Expansion of Existing Assets

When a piece of property adjacent to an investor’s land becomes available to buy, it is a smart business move to purchase it for expansion. Banks are less likely to fund this type of expansion, but bridge loans make the process much easier. This non-recourse financing is more aggressive on leverage and pricing so investors can expand their current assets easily.

Bridge loans are an invaluable tool for purchasing commercial real estate in Florida. While their primary purpose is to serve as gap financing until another method of permanent funding is approved, bridge loans have many uses and are beneficial for investors in several ways. If you are interested in securing a bridge loan to help you with any of the five situations discussed in this article, contact HML Solutions today to discuss your qualifications and determine if this avenue of financing can benefit your investment.

Debunking the Myths about Hard Money Loans

As investment financing needs expand across the globe, many types of financing have become available. One of the most popular and misunderstood are those of the hard money loans which involve asset-based funds. This means the loans are guaranteed by private investment companies like HML Solutions in exchange for secured real property. Because of the popularity of these loans, many myths that need to be debunked have grown to surround the investment companies and the funds they provide.

Myth 1: Desperate Borrowers

You don’t have to be desperate to use hard money financing alternatives; you simply need to understand how to leverage your options. Successful investors never use their own cash to make deals. That doesn’t make them desperate – just smart.

Myth 2: Options Unavailable

Traditional loans have severe limitations and move through the system slowly. For that reason, most people seek hard money loans because of:

  • Property type
  • Closing speed
  • Loan Flexibility
  • Property condition

Other financing options may be available, but they won’t work when quick deals are necessary.

Myth 3: Bad Credit

Bad credit has nothing to do with the type of properties you may want to rehab, yet the myth continues to exist. Additionally, credit scores have nothing to do with funding a loan in 10 days or getting a property under contract within weeks. Traditional financing is slow, so hard money options can help.

Myth 4: Loan Sharks

Groups of individuals that loan hard money are not loan sharks. Rather, they are businessmen and women who understand how to get a better return on their money than letting it sit in a bank. Some even use their home equity to get paid to live in their house.

Myth 5: Expensive Money

Hard money loans are slightly more costly than traditional financing methods, but they are much easier to get. When you need money to act quickly on a deal, and you can’t get funding from a bank to cover it in time, hard money is the way to go.

Myth 6: No-Doc Loans

Two decades ago, you may have obtained financing on a handshake and relied on your attorney to hammer out the details of the loan, but that is no longer the case. Loans need extensive paper trails, so today, the hard money loans often depend on these documents:

  • Personal identification
  • Bank statements
  • Property appraisal
  • Title report
  • Company tax returns

Whether you are seeking a traditional financial loan or a hard money alternative, each of these documents is essential in securing modern financing and loans.

Myth 7: 100 Percent Financing

Private lenders may offer 100 percent financing on property purchases or rehabs, but the hard money lenders are not part of this group. A lender that provides complete financing on any project or purchase would assume all the risk, and that doesn’t make any financial sense.

Myths Die Hard

Don’t believe everything you read about hard money loans. Instead, if you have questions, contact HML Solutions for answers. Our finance representatives can quickly quell the many myths you may have heard and provide you with helpful information on your hard money finance options. Call us today.