How to get a bridge loan to develop your property

How to get a Bridge Loan to Develop your Property

What is a bridge loan and how does it work? This type of loan has increasingly become more popular within the real estate market due to the advantage it has in easing over buying and selling property, as well as putting a home on the market.

So, who does bridge loans and how much does bridge financing cost? How does a bridge loan work real estate and can I get a bridge loan? Considering this form of financing might be a good option depending on multiple factors.

 

What is a Bridge Loan and How does it Work?

When a buyer is in the process of purchasing new property before a current property has been sold, a home equity loan or a residential bridge loan investment is most commonly used. Often times it is advised that a buyer waits to sell a current property before moving, but depending on personal situations, such as taking on a new job or helping a family member in need, this may not always be an easy thing to accomplish. Borrowing for property development from bridge loan investors has increased in popularity due to the negotiation available in terms.

What is a bridge loan in real estate? With the certainty that a current property will sell, getting a bridge loan can help alleviate stress. Speaking with trusted bridge loan investors and learning about this form of financing is the best way to find the right type of financing in bridge loan real estate.

Some would argue that a home equity loan is preferable because it is less expensive but it may not be as advantageous. With home equity it is much more difficult to borrow money if the property is still on the market.

 

How does a Bridge Loan Work Real Estate and Property?

A residential bridge loan is a temporary form of financing that helps individuals ease the stress of buying a house though their current property has yet to sell. This form of financing is actually secured by existing property.

While some people think that they will not qualify for a bridge loan, the majority of lenders don’t abide by a certain set of guidelines in terms of credit score or financial history. Often times the buyers even have a first mortgage on their current property and for a period of time will own two separate properties. This variable does not affect one’s chances of receiving financing. By learning how to get a bridge loan it is often preferable.

 

Fees Associated with Borrowing

After understanding how a bridge loan works and bridge loans for residential real estate, it’s best to ask, how much does bridge financing cost? The rates are going to vary depending on the lender that is used.

Bridge loan real estate fees fluctuate depending on location, though most often, the lender will give the borrower leverage by not requiring payments for a few months after finalizing the loan (though this may accrue interest with some lenders.)

The amount of money that is borrowed may also create higher origination fees in bridge loans for residential real estate.

 

Advantages of Bridge Borrowing

After learning how to get a bridge loan, the main advantages of bridge loan financing is being able to purchase property without having any restrictions. Because the majority of this borrowing is short-term it is actually safer than if the lender were to agree on one for the long term. Those who buy and sell properties can also learn how to get a loan for property development.

With long term loans there is more opportunity for financial hardship while accruing interest or penalty fees. Getting a bridge loan is designed to be paid off completely without penalty while still giving the borrower time to prepare for the move and pay-off. It’s important to note these can run anywhere from multiple weeks, to six months to several years.

 

Qualifying for Financing

Bridge Loan Financing does require some qualifications from the borrower. One of the major components is the debt service coverage ratio which is the total income that is generated by the property yearly in comparison to annual mortgage debt.

Hard money lenders are also likely to look at the property itself, study it’s value and invested equity. Though credit may be looked at briefly, these details play a bigger role in approval odds.

The reason why this is more of a focus is because it acts as a safety net for the lender and it helps them eliminate risk associated with the loan. Keep in mind that the rate of equity is going to vary from one lender to the next.

 

Finding the Appropriate Lender

Who does bridge loans? There are a couple of different ways to find bridging loan providers. The first is going through a traditional bank, though, this may be a bit more challenging because they are wary in terms of loaning money because of the high risk involved. It’s always the best idea to compare bridging loans between banks and private financing.

Choosing to go through a lender that specializes in a real estate bridge loan may be a bit more receptive when it comes to the borrowers situation and current financial needs. Simply searching for these companies online will result in plenty of private bridging loan providers as well as crowdfunding. When it comes to buying and flipping it’s also beneficial to learn how to get a loan for property development.

If a consumer is asking “Can I get a bridge loan? or “Is it smart investing in bridge loans?” It would be best to gather information from bridge loan lenders, compare the fees, terms and rates and see which option would work best for you. Keep in mind that finalizing this with the wrong lender does have risky ramifications, which is why it’s best to do the most research on those investing in bridge loans.

Overall, a real estate bridge loan is going to support a consumer that is navigating through moving or property development projects. Traders can also greatly benefit from this type of financing.

If a buyer is borrowing for property development and looking to sell quickly this allows them to complete the renovation. The deadlines and amount of time for bridge financing real estate can be discussed with the lending company.

 

Bridge Financing Real Estate is more Advantageous than Risky

What is a bridge loan in real estate? Though borrowing money can be nerve-racking, a bridge loan investment is much safer than it is risky in comparison to other loans.

A bridge loan investment is malleable and most companies are willing to work with personal situations.

Choosing to do research, understanding how a bridge loan works and taking the time to compare bridging loans can significantly work in a consumer’s favor.

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Everything you need to know about REIT

What are REITs?

What are REITs? REIT is an acronym for Real Estate Investment Trust (REIT), which can be defined as a company that owns and operates real estate that is income producing, as well as owning assets relating to real estate. In 1960, Congress established REITs to allow investors and individuals the ability to invest in wide-ranging and large-scale income producing properties. REITs differ from other real estate investment types because REITs are required to develop and acquire investment properties with the purpose of operating them as part of an owned investment portfolio, whereas typical real estate investors resell properties after they have been developed or renovated, and/or after holding an investment for a profitable period. Income producing properties own and operated by REITs include a range of property types, such as apartments, shopping malls, hotels, manufacturing warehouses, office buildings, in addition to mortgages and mortgage-backed securities. Majority of REITs prefer to specialize in a specific property type, for instance, retail properties. There are multifamily REITs, office REITs, Retail, and REITs that specialize in healthcare facilities, in addition to others. REITs provide a way in which individual investors can reap the benefit of earning a portion of income produced through the ownership of commercial properties, without having to go through the process of purchasing one.

Types of REITs

REITS can be categorized as mortgage, equity, or hybrid. Most REITs are equity REITs, which normally operate and own income producing properties. Conversely, mortgage REITs provide real estate owners and managers with money directly as loans or mortgages, or indirectly as the purchase of mortgage-backed securities. Mortgage REITs on average, rely on more leverage than equity REITs, as they rely more on borrowed capital. In addition, mortgage REITs typically manage their own credit risks and interest rates through derivatives and other types of “hedging” techniques. Hybrid REITs are companies that utilize a mixture of investment type strategies from mortgage and equity REITs.

Public REITs, whether mortgage, equity, or hybrid are registered with the U.S. Securities and Exchange Commission (SEC) and are traded publicly on the stock exchange. REITs that are registered with the SEC but are not publicly traded are called non-traded REITs or non-exchange traded REITs.

Publicly Traded REITs

Publicly traded REITs differ from non-listed REITs in several ways. Publicly traded REITs are also referred to as listed REITs and are more liquid because REIT shares are traded and listed publicly on popular stock exchanges. Brokerage commissions are also the same as for other public traded stocks, and rules governing stock exchange require directors to be separate from management. In addition, Nasdaq and NYSE rules require independent nominating, compensation committees, and fully independent audit. In addition, the minimum investment amount for a listed REIT is one share and market prices are publicly available in real-time, as well as a range of analytic reports. Public REITs are also managed by company employees, and specific exchange rules are in a corporate governance.

Public Non-Traded REITs

A public non traded REIT files with the SEC, but their shares are not publicly traded on stock exchanges and are also referred to as non listed REITs. This causes shares to be more illiquid and share redemption programs do differ with respect to the company and are very limited on average. Individual investors typically must wait a number of years (typically 10) to receive a return on their investment until the company chooses to engage in a public transaction, such as listing shares on a stock exchange or liquidating company assets. Public non traded REITs broker commission differs as well. Fees are a typical 9% to 10% of the investment, as well as other upfront costs, management fees, and back-end fees may also be charged. Public non traded REITs also typically have no employees, a third party manages the company, and corporate governance is subject to North American Securities Administrators Association (NASAA) guidelines and state guidelines. In addition, many states have adopted NASAA guidelines and require majority directors to be separate from management. Public non-traded REIT share values are not transparent. Independent information concerning share values is typically not available. Although, companies may provide share values one and a half years after an offer has transpired.

Non traded REITs performance has been under scrutiny over recent years due to its illiquid nature, lack of valuations, and governance issues. According to the Gilbert, Ariz., a research company that tracts non-traded REITs, asserts that 2017 marks the lowest capital-raising activity over the last 14 years. According to Commercial Real Estate Direct, non traded REITs performance was up 11.3% during the fourth quarter, from the third quarter of 2017, bringing capital rising for 2017 to $3.9 billion, per the “Summit Investment Research” company. In contrast to 2016, in which non traded REITs raised $4.8 billion, approximately 23% more than 2017 figures.

Private REITs

Private REITs, also known as a private-placement REIT are non-traded and non listed REITs that are typically associated with strong risks. Private REIT requirements differ from other REITs because they are exempt from registration according to the Securities Act and are not subject to the same disclosure and requirements that non-traded REITs are subject to, making it very difficult for investors to get a sense of value or make an informed investment decision. Accredited investors and investors with an excess net of $1 million are generally the only groups that can buy private REITs, which makes them least popular. Private REIT requirements differ from listed REIT investments as they are less strenuous and unlike public REITs, such as venture capital funds and hedge funds, which do not necessarily have to give prescribed disclosures to accredited investors. The concept behind an accredited investor relies on the ability of a private REIT investor to bear any economic risk of investing in unregistered securities.

REIT Investment Caution

Like with any investment, with REIT investments one should take one’s own financial situation into account, consult a financial adviser, and do thorough research prior to making any type of investment. Public REITs’ quarterly and annual reports, offering prospectus, and disclosure filings are available for review at www.sec.gov. Public non-traded REIT investments that are listed on major stock exchanges can be purchased through a stockbroker, as with other publicly traded stocks. Non-traded shares can also be purchased from brokers, but brokers must have been engaged in the participation of the REIT offering. REIT exchange-traded fund and REIT mutual funds are also an option for investment. It is important that one understand the risks associated with different investment strategies prior to backing an investment in any type of REIT.

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Short-Term Celebrity Rentals

In real estate, it is all about, “Location, Location, Location!”  And when that beautiful location, La Quinta, CA, is near a music mecca such as Coachella, the “Gem of the Desert” becomes a destination and temporary home for festival frolickers.  

Located in the Coachella Valley in Southern California, La Quinta is less than 6 miles from Coachella, California, home to one of the premier music festivals in the world.

For two weeks each April, Coachella becomes the music mecca of the world- an event that young and old alike flock to. Whether music lovers or not, people come to Coachella to have an experience, which for many, is a once in a lifetime chance to feel like a celebrity, or if funds allow, dare I say, royalty?

Coachella is one of the few events where celebrities hob knob with average, everyday people and share in their love of music, art and unique experiences.  It’s an experience people are willing to pay top dollar for. A premier music event requires premier accommodations, and that is where short term rental property comes into play.

Imagine investing in a short-term rental property, one perfect for the burgeoning Airbnb and home sharing business. In 2017, Beyoncé paid $50,000 for a week stay at a private estate during the event.  Coachella is indeed an event that can potentially pay off one year’s worth of mortgage payments with a mere week or two of rentals.

In addition to being home to this unique music festival (as well as the newer ones at the same site such as “Stagecoach” and “Desert Trip”), one should not forget that La Quinta is also home to the world famous ”PGA West”, as well as twenty other premier golf courses. La Quinta also boasts one of the top golf destinations in the form of it’s “La Quinta Resort and Club” and The PGA Tour Qualifying Schools also calls La Quinta home.      

La Quinta, California has been growing at a staggering rate, and continued growth is forecast far into the future.  Don’t just invest in a property; invest in a DESTINATION.

 

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