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Shifting Your Investment Strategy

by | Nov 30, 2022 | 22 comments

Shifting Your Investment Strategy

Real estate market volatility around the country means constant changes to investor’s exit strategies. With average home sale prices declining in previously white-hot markets, some fix and flip investors have been wondering if they should lean into the booming rental strategy until home sale prices are in a better position. Other investors are already interested in the buy and hold rental strategy, but are wary of 30-year rental loans with stiff pre-payment penalties. Being flexible with your investment strategy is invaluable for a real estate investor as it allows you to maximize your asset’s potential value despite shifting market conditions.

Working with a lender that’s equally flexible can make a huge difference in your ability to navigate the market , and that’s why Asset Based Lending has introduced a new lending program to help investors bridge the gap between their most recent project and their final desired exit strategy. Our new bridge loans for stabilized properties are designed to provide the financial flexibility that real estate investors are looking for, offering them the chance to hold property as a rental asset for up to 24 months before selling the property or refinancing into permanent financing. With no pre-payment penalties whatsoever, this interest-only loan allows investors to exit the loan whenever they choose, so there’s no downside for selling at a profit or refinancing early. If this program sounds like it might be helpful, then keep reading to find out how these loans work and what properties they can finance.

What are stabilized bridge loans?

These stabilized bridge loans are true to their name, bridging the gap between your hard money loan and permanent financing. They also work for turnkey ready rental property where investors are looking to avoid the high interest rates and harsh pre-payment penalties of current long-term rental financing. These are 2-year debt service coverage loans with interest only payments and zero pre-payment penalties, so investors are free to sell their asset or refinance into permanent financing whenever they choose with no issues or hassle. If market conditions still aren’t where you’d like at the end of 24 months, you may be able to extend the same loan terms for an additional fee. ABL uses flexible underwriting to structure each loan to match the borrower’s needs, but typical stabilized loan is a 24-month term with rates starting at 10.5% and LTV up to 65%-70%

This type of loan program is designed for investors who want to wait out volatile market conditions while still taking advantage of the booming rental markets, allowing their real estate investment to continue working for them. There’s also no experience requirement with this lending program, so it benefits first time investors and seasoned professionals. Whether you end up holding the property in your rental portfolio, or selling it for a profit, your exit strategy is viable and secure with our stabilized loans. If you choose to refinance then you’ll work with the same ABL team upon exiting, guaranteeing you the same five-star service that has become synonymous with ABL hard money lending.

How do these stabilized loans work?

These temporary bridge loans are designed for investors to pivot and shift their investment strategy to maximize their money-making potential. If you’re planning on selling a recent rehab project or new construction property but home sale prices have dropped below an acceptable level, you can use this financing to rent out your property for up to two years with no pre-payment penalty, allowing you to cash flow while you wait to either sell the property at a better time or continue holding it in your rental portfolio with permanent financing. With no penalties for early exits, you’re only responsible for your monthly interest payments until you determine your final exit strategy.

How about an example? Let’s say you’re a real estate investor that just completed a fix and flip project with another hard money lender. Your financing is about to end, but you don’t want to sell the property just yet because home sale prices are down from what you predicted, so you want to continue holding the asset as a rental property until the market matches your preferred sale point. ABL can offer you this temporary bridge loan for up to 24 months that allows you to immediately start renting out the property and begin generating monthly cash flow instead of sitting on a finished property until the market shifts. Once you decide to sell the property, or if you change your mind and want to refinance to hold the asset in your rental portfolio, ABL helps you with whatever exit you’ve chosen. No strings attached, no additional fees.

ABL closes these bridge loans in less than two weeks, with our average closing being just 10 days and the ability to close as quickly as two days with the appropriate paperwork. Its important to note that any renovations or construction must be totally complete before we finance the project. These loans are strictly for stabilized properties that can maintain a leased tenant for the duration of the loan. If you’re looking to finance the renovation or ground up construction of a property, we can do that with our fix and flip or new construction programs.

What types of properties work with stabilized bridge loans?

As long as the properties are rent-ready with no renovation needed, then we can finance both single family and multifamily assets. For multifamily, our stabilization loans can finance up to 20 units. These bridge loans work best with multifamily properties as the terms are dependent on potential cash flow, with a minimum 1.05 DSCR requirement. When calculating the property’s DSCR, we use the lesser of full market rent or lease rent. This is a departure from standard 30 year DSCR loans, which typically consider the lesser of leased rents or 90-95% of market rents.

These loans do not work for mixed-use properties of any kind, which is a departure from our typical lending programs. If you’re looking to finance a mixed-use buy and hold rental property, then we have rental loans that offer competitive rates and reliable closings that can help mixed-use real estate investors.

Final Thoughts

With the ever changing real estate markets that investors are seeing across the country, the uncertainty in their upcoming investment exits can produce a lot of anxiety and doubt. ABL is looking to remedy those fears with our two year bridge loans for stabilized properties. This versatile lending program benefits all types of investment projects, whether you’re looking to delay selling your fix and flip or ground up construction until the market adjusts in your favor, or you’re looking to hold your turnkey property until mortgage rates come down in the future.

First time real estate investors may benefit the most from these bridge loans, as many investors began their first project within the last 12 months and are preparing to exit in an entirely different market than they started. New investors can utilize this bridge financing for stabilized properties and ensure their first investment remains as successful as possible, and potentially fine themselves in an even better position than they initially predicted!

If you’re a real estate investor that’s looking to bridge the financing gap between their most recent project and their final exit strategy, then ABL bridge loans are what you need. Contact us today to discuss your current situation and see if our lending programs can help finance your success. Give us a call at 201-942-0909 or click here to get pre-qualified today.

22 Comments

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  13. This article is very helpful and well written. I appreciate how the author took the time to discuss in detail about their bridge lending program. The ability to hold the mortgage for 24 month without a prepayment penalty and then the option to refinance into a fixed DSCR program or extend the current loan is valuable. I would highly recommend this company and program for investors and fix and flip enthusiasts for short term financing.

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