Finding the best way to finance your commercial property deal means thinking outside of the regular options you have been taught to choose for financing. By finding an unconventional choice that fits your deal better than the go-to option, you lower your overhead and make yourself an even better return, without having to hope for better commercial real estate market conditions than you originally projected.

Financing Property Rehabilitation

The biggest reason to use bridge loans for long-term purchases is to close quickly, especially if the property needs some work. Many traditional lenders offering low-rate, long-term commercial mortgages require the property to be turnkey-ready before financing. They also take a long time to process applications. Bridge loans and flipping loans, on the other hand, close in days and finance any commercial property. They also keep monthly payment costs down by only requiring you to keep up with the interest.

Keep Your Capital for Renovations

Loans aimed at flippers and other short-term investors are often optimized to minimize the down payment, which lets you focus on the cost of renovations. This is a crucial point in the investment’s development because if you dig deep and maximize the value of the property to your market, you could bring the value of the building up a lot, and that affects the valuation when you refinance into a long-term loan. That’s why some investors raise more money with instruments like additional bridge loans on existing investments or stated income loans on stabilized income properties.

Refinancing an Updated Property

After you’ve made improvements and updates to your new property, it’s time to find a more traditional long-term commercial real estate loan to carry the debt. Bridge loans and flipping loans don’t have terms beyond a couple of years, and they do have large payoff amounts at the end.

Luckily, once you have improved a property, you usually qualify for a traditional commercial mortgage or a long-term stated income loan. If you improved the property’s value over the closing amount by enough, the new loan will cover the old one and leave you with a serious chunk of equity, without a big down payment.

Manage Risk as You Expand Your Portfolio

If you manage to refinance at a great LTV and you get more than it costs to pay off the original loan, you can cover the additional loans you took for renovations instead of letting your other investments do it. Manage this often enough and you wind up increasing your income property holdings quickly, without putting a lot of your liquidity at risk each time.