Do you ever see a house with potential and think, “This could be a great investment or a great rental property with some TLC!”? Well, guess what? You can turn that fixer-upper into a profitable rental property or your perfect place with a little help from a bridge loan!

What’s a Bridge Loan?

Think of a bridge loan like a temporary bridge. It helps you get from where you are now (wanting to buy that fixer-upper) to where you want to be (owning a successful rental property or your dream home!). Bridge loans are short-term loans, usually lasting 12 to 24 months, that give you the money you need to buy a property and start fixing it up. The cool thing is there’s no penalty if you pay it back early!

How Can You Use a Bridge Loan for a Fixer-Upper?

There are two main ways a bridge loan can help with your fixer-upper project:

1. Fix and Rent: Let’s say you find a house that needs some work, but you know it could be a great rental property once it’s fixed up. A bridge loan can give you the money to buy the house and cover the cost of repairs. Once the house is all fixed up and looking great, you can refinance the bridge loan into a longer-term loan with a lower interest rate. This frees you up from the shorter repayment timeline of the bridge loan. Then, you can rent out the property to tenants and start generating income!
2. Rehab and Refinance (Rent Out): Maybe you don’t want to sell your fixer-upper, you want to turn it into a rental property after all the hard work. A bridge loan can still help. You can use the loan to buy the house and make repairs, and then when the work is done, you can refinance the bridge loan into a longer-term loan with a lower interest rate (in most cases). This makes your monthly payments smaller and easier to manage, allowing your property to cash flow for you.

How Much Money Can You Get with a Bridge Loan?

Bridge loans can cover a lot of the costs of buying and fixing up a property. They typically allow you to borrow up to 90% of the value of the property after the repairs are done (called the Loan-to-Value) and up to 75% of the total cost of the project (including the purchase price and repairs, called the Loan-to-Cost).

Ready to Get Started?

If you’re thinking about using a bridge loan to fix up a property, e-mail Lucas@LucasLending.com or schedule a call Here! We can help you figure out if a bridge loan is right for you and how much money you can borrow.

Remember: This is just a basic overview. This is not a commitment to lend. Be sure to talk to the Lucas Lending team for more details and explore the different financing options available depending on your long-term goals for the property. You can schedule a call HERE.