I think this is an amazing concept and should be shared. I am trying to think of this in a different way to see through the different areas that this covers, aka break it down from a fancy word into something simple.
Let me understand this:
Bridging Financing:
Description:
It is a equity based financing that use your primary residence to fund down payment and repair of a SFR or MFR. Each property holds an individual lien and second lien based upon the equity needed to fund the loan. When you increase the equity by 20% more than the original lien or second lien. The second lien is consider 'paid in full'.
It is not a line of credit but a loan.
Benefits:
- Little to 'no' money down strategy
- Uses equity to provide for potential growth
- Increased ROI because limited out of pocket costs
Limitations:
- Equity required to use this type of loan structure
- Requires a flexible lender
Risks:
Potential to Lose all properties that have 'bridged' equity between them.<?>
Questions:
Do you recycle the equity for each residence or only have a one residence carry equity of the lien burden? What issue or risks are associated with this type of loan structure and what type of planning should be done if you hit a catastrophe? What actions does the lender have if there is a greater than 30% loss in equity to recover cost?
I will update this post as I gather clearer information.
