As economic activity declines significantly and traditional lenders tighten their lending criteria, it becomes harder for real estate investors to survive. However, all is not lost because investors with healthy assets can obtain bridge loans to help them navigate the economic crisis. The team at RTI Bridge Loans have helped many people with bridge loans during different periods of recession and can help you too. Read on to learn how it might be beneficial for you to utilize bridge loans for your investment property during these hard times.
Table of Contents
- » What is a Bridge Loan?
- » Is Asset-Based Lending a Good Idea in the Current Banking Crisis Market?
- » Benefits of Bridge Loans During A Recession
- » Why are Bridge Loans for Multifamily Real Estate a Safe Play?
- » What are the Risks of Investing In Multifamily Real Estate During A Recession?
- » Let RTI Bridge Loans Help You Get a Bridge Loan in Southern California
What is a Bridge Loan?
A bridge loan is a type of short-term financing investors can secure through real estate. Unlike traditional bank loans, which are based on your creditworthiness, bridge loans for real estate are based on the property’s value. Even with poor credit, you may still qualify for a bridge loan if you have physical property to use as collateral.
Also Read: Is A Bridge Loan The Right Fit For You?
Is Asset-Based Lending a Good Idea in the Current Banking Crisis Market?
So, are bridge loans good in the current banking crisis market? Yes, hard money lending can be a good idea for real estate investors looking to increase their liquidity and take advantage of investment opportunities that require fast funding.
However, let’s be honest: Things currently aren’t looking great, and you might feel skeptical about applying for a hard money loan. However, everything will probably be okay if you’re active and reasonably experienced in the multifamily sector.
Benefits of Bridge Loans During A Recession
Here are some reasons why bridge lending is the secret sauce to real estate success during a recession:
» Funding Amount
Obtaining bridge loans in the current banking crisis market is an excellent idea because they can provide you with an extended credit facility that you can strategically use throughout the recession
Since bridge loans are asset-based, lenders are only concerned about the value and viability of the asset you offer. Also, the collateral isn’t limited to only property. You can also use valuable equipment such as business inventory or high-worth machinery to obtain quick cash.
» Terms and Conditions
As a real estate investor, you know that time is money, and you often need to act fast to secure the deal. Besides the fact that you can qualify for a bridge loan much quicker than a traditional one, bridging loans can also be arranged rapidly, which can be very handy during a recession. You can close the deal in a few days and get your funding almost immediately. Also, unlike conventional lenders, hard money lenders usually offer the flexibility to use the loan proceeds as you wish.
Note that bridge loan terms can vary depending on the lender you work with, so selecting an experienced, trustworthy, and reliable lender is crucial.
Why are Bridge Loans for Multifamily Real Estate a Safe Play?
A wisely selected real estate venture has the potential to allow you to reap the benefits of long-term wealth creation even through times of economic uncertainty. There are a few reasons why investing in multifamily real estate during a recession is generally a safe play.
Here are some essential factors to keep in mind when considering investing in multifamily real estate during a recession:
» Great Inflation Hedges
Investing in multifamily properties enables you to worry much less about inflation. After all, when prices increase, you can raise your rent. Unlike other commercial real estate properties like office and industrial properties, where leases are significantly longer term and span over several years, you generally handle renewals once a year for multifamily properties. This gives you ample time to adjust your rent to cost changes and market dynamics.
» Housing Is in Demand — and a Recession Won’t Change That
We all know there’s intense, sustained demand for more housing. Economic downturns haven’t changed that in the past and won’t in the future. After all, people always need a place to live, which makes owning a share of the housing inventory make good business sense.
» Renting’s Becoming More Popular
While most households own their own homes, renting has become increasingly popular over the past few years, especially among people under 35. More and more people are choosing to rent by the day, and this number will only increase during a recession.
» Financing Options Are Better
While Interest rates are rising, they remain far lower for multifamily properties than any other commercial real estate asset type.
Well, hard money lenders are familiar with these dynamics and understand that multifamily bridge loans generally have a far lower risk profile. So, apartment loans will almost always come in cheaper and better.
But it isn’t just that. The multifamily sector benefits from a wealth of loans specifically designed to reduce risk on lenders and provide better terms for borrowers. Sure, the interest rates are higher now than a year or two ago, but relatively speaking, these programs can offer terms that most traditional lenders wouldn’t dare to.
» Tax Benefits
When it comes to residential real estate investment, many may be tempted to lean toward single-family. However, when every dollar counts, multifamily investing during a recession may be the better idea because of the significant tax advantages.
What are the Risks of Investing In Multifamily Real Estate During A Recession?
Investing in multifamily real estate during a recession does come with some risks. For example, if the recession is worse than expected, it could decrease demand for rental properties, resulting in lower occupancy rates and rental income. Additionally, interest rates may rise during a recession, making it more expensive to finance a multifamily property. Lastly, if the recession is severe, it could lead to a decrease in property values, which may reduce your investment’s value.
However, we consider multifamily real estate investments a safe bet during a recession. After all, they’re always in demand, renting is becoming more popular, you can increase multifamily rents faster, there are many competitive financing options available, and there are significant tax advantages.
Let RTI Bridge Loans Help You Get a Bridge Loan in Southern California
If you’re looking for bridge loans in Southern California, you should do your due diligence before picking a lender who can provide quick and reliable lending. You can’t go wrong with RTI Bridge Loans if you’re looking for a reliable, experienced, and proficient lender. We offer several custom financing solutions to help keep your business afloat during a recession.
Besides bridge loans, we also provide hard money loans, fix and flip loans, and private money loans. Call us at (562) 857-2285 or visit our website to learn more and see if you qualify for a bridge loan today!