Help understanding bridge loans 🙏🏻

[Jon Guy]

Can some experienced investors explain in simple terms how bridge loans work? I’ve been doing some research but I don’t think I fully understand. 

With a bridge loan do I have to raise less money from investors because money for cap ex will be included in the bridge loan. How will a lender determine how much they will give me for improvements? 

[Greg Dickerson]

Originally posted by @Jon Guy:

Can some experienced investors explain in simple terms how bridge loans work? I’ve been doing some research but I don’t think I fully understand. 

With a bridge loan do I have to raise less money from investors because money for cap ex will be included in the bridge loan. How will a lender determine how much they will give me for improvements? 

A bridge loan is just a short term loan typically 1 year and is used until you can get your permanent financing. Its a bridge between the acquisition and permanent mortgage. Bridge loans are generally quicker to close but also costs a little more. Every lender is different and have different programs so you need to speak to several to find out their LTV, LTC requirements but generally you will still need to raise 20-40% equity depending on the type of deal or asset, the location and your experience and finials.

Also a bridge loan is not the same as mezzanine loan which is a subordinated loan that provides additional equity and is junior to the senior debt but senior to the equity.