The most successful people are those who are able to identify potential roadblocks and come up with creative solutions to overcome them. This is just as true in real estate, as it is in life. That’s why Hurst Lending offers popular solutions, like Bridge Loans. . In real estate investing, creative solutions can often be the best way to ensure success.
When purchasing investment properties, particularly in competitive markets, investors can face many different challenges that might block both investment purchases, and returns on those investments. Creative solutions can minimize the impacts of common issues like limited liquid cash, bidding wars, lack of enough investment experience, and more. Those problems won’t just go away on their own, they have to be addressed for real estate investors to reach their goals. In this two-part series, I’ll describe two different solutions that we’ve created at Hurst Lending to give Realtors and their customers the tools they need to succeed in all of their real estate investing adventures. First, let’s talk about bridge loans, and how they can be the secret to helping your clients get the house of their dreams. , s.
What Are Bridge Loans?
Bridge (sometimes called gap, interim, or swing) loans are often used by buyers that are seeking to finance a new home purchase, while their old home is still on the market. Given the competitive nature of real estate across the country right now, an increasing number of homeowners are finding themselves in this position. Bridge loans are typically designed to be paid back within six to twelve months. ,As a result, they tend to carry slightly higher interest rates. They can usually be completed within two weeks.
Real Estate Investment Success Case Study
Recently, Hurst Lending worked with an investor who had his sights set on a property in the very competitive market of Austin, Texas. As we discussed his goals, we identified a few issues.
Roadblocks to Investment Success
- There were very few properties available for purchase in the competitive market.
- There were multiple buyers bidding on the property he’d chosen.
- The investor had a relatively small amount of liquid cash.
Though there were only a few issues, they were big ones that could have cost him the deal. These are also the types of issues that many potential homebuyers are still facing today. As you likely know, a cash offer almost always works to win a bidding war, but the average investor rarely has the ability to offer cash, or enough experience to be attractive to traditional lenders. This is a perfect example of where a creative solution like a bridge loan can be the perfect solution.
Solution: Bridge Loans
When an investory or homebuyer lacks the liquid cash to purchase a property, or create a competitive offer, a bridge loan can give them the cash they need to close the deal. . In this case, we were able to offer this investor a low-cost bridge loan with only 5% rather than 20% down. Not only did that make him a far more attractive buyer, but he was able to gain several edges and win the deal over other buyers, because a cash deal meant:
- The seller knew the deal would go through without any glitches or financing issues
- The seller knew that with a shortened closing time frame, they would not have to make another mortgage payment
- The closing could take place in 14-17 days, rather than the traditional 30 days
The investor received several advantages, too. Not only did he win the deal, but he got an affordable option that saved money because:
- With his attractive cash offer, he was able to buy the property for $10,000 below the asking price
- After winning the real estate deal, he was able to convert out of the Bridge Loan and lock in low interest, long term financing
In the end, the savings this client received far exceeded the relatively low cost of the bridge loan. Bridge loans are just one of the ways that Hurst Lending can help you win competitive deals. Check out our next blog for more insights on real estate and master the tools you need to find the edge to win every bid.
Hurst Lending is a Bridge Loan Lender based in Dallas, Texas.