Bridge Loan Facts - Multifamily Financing
The bridge loan facts are the bridge loan facts and the fact is that in order to buy unstabilized apartment complexes or to buy down debt on a multifamily development you have to use a bridge loan. We hear all the stories about brokers telling borrowers that they can get 7% bridge loan rates, 6% bridge loan rates and now even 5% rates that are interest only with up to 80% LTV to purchase distressed assets or to buy out their debt at a discount.
The simple truth is that in most cases these are lies told by brokers to borrowers in order to get the borrower to pay an exorbitant ($10,000 and more) due diligence fee in order to engage in a loan process that will never close. In this case borrower BE WARE!
Bridge Loan Do's & Don'ts - Apartments & Multifmaily
A few things to be aware of when considering taking out a bridge loan for an apartment or multifamily development.
- DON'T pay huge fees in advance to bridge loan brokers. Some brokers stick borrowers with fees of $10,000 or even $20,000 just to get them to engage. A small application fee equaling about 20-50 basis points (0.20 to 0.50% or 2/10ths to 1/2 of one percent) is acceptable and reasonable when dealing with a reputable broker or originator that is truly connected to capital.
- DO pay expense deposits at time of a formal LOI from a reputable lender or capital advisor. This is where the rubber hits the road. Borrowers can expect to pay up to $40,000, depending on deal size, to get the investor/lender moving to complete site visits and to pay for third party fees. Hesitation at this stage can you leave a borrower without a closing. The bottom line is this, make sure to pay lenders these larger fees, don't get duped into paying them to brokers. You should pay nominal application fees to brokers and originators.
- DON'T get blind sided by false promises of extremely low rates on any bridge loan! Almost every bridge loan has a rate of 10-12% with points of 3-6%. The market is the market and these investors need to make a minimum of 12-18% on their money ... period, end of sentence. If you get quoted lower rates, it is usually not a true bridge loan and may have hard prepays so be cautious.
- DO provide requested documents promptly. Remember that getting a bridge loan is more like creating a partnership, the only difference is that this partnership costs less than a typical partner who expects you to do all the work and still has his hand out for 50% of your profits.
To speak with a bridge loan expert about your apartment building, apartment complex or mulitifamily development call the bridge loan expert, Michael Gross with Dividend America Commerical Lending at 404-549-6756 or email him at firstname.lastname@example.org.
Bridge loan experts! Send us your opportunity we are in lending in all 50 states and focusing on bridge loans in the markets and submarkets listed in the S&P Case Shiller Home Price Index and the surrounding secondary markets to those cities. We look for opportunities in: Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, Fort Lauderdale, Orlando, San Diego, New York, San Francisco, Phoenix, Atlanta, Tampa Bay, Detroit, Minneapolis-Saint Paul, Charlotte, Dallas / Fort Worth, Portland, Seattle, Cleveland, Oklahoma City, Jacksonville, Indianapolis, Nashville, Kansas City, Louisville, Milwaukee, New Orleans, Philadelphia, Raleigh, Sacramento, Salt Lake City, San Antonio, San Jose, Saint Louis, Tucson, Austin, Baltimore.