Bridge Loans Explained: Short-Term Financing for Flippers

Bridge loans are short-term financing tools designed to help real estate investors transition between buying a new investment property and selling another. They provide immediate capital to secure your next deal without waiting for existing properties to sell.

Key features of bridge loans:

• Quick Funding: Typically approved in days rather than weeks, allowing investors to move fast in competitive markets.

• Short Loan Terms: Usually 6-12 months, intended only as a temporary solution.

• Higher Interest Rates: Due to convenience and speed, bridge loans often carry higher interest rates (8-12%).

• Collateral-Based: Approval mainly depends on the value of your existing property rather than personal credit scores.

When should you use a bridge loan?

• To secure a property quickly in a hot market

• To avoid missing profitable investment opportunities due to temporary cash flow issues

• When you’re certain you can sell your existing property soon and repay the loan

Bridge loans offer quick access to necessary funds, but because of higher costs, they should be part of a strategic short-term investment plan.