DSCR Direct

Bridge Loans: Quick Acquisitions, Higher Costs

Bridge loans are short-term financing tools designed for speed. When you need to close fast on an investment property - whether it is an auction deal, a distressed property, or a time-sensitive off-market opportunity - bridge loans can fund in days rather than weeks. They are also commonly used for renovation projects where the property does not yet qualify for permanent financing.

The trade-off is cost. Bridge loans typically carry interest rates of 8-14%, origination fees of 1-3 points, and short terms of 6-18 months. These costs add up quickly. A $300K bridge loan at 10% with 2 points costs roughly $34,000 over 12 months - money that comes directly out of your profit margin.

The key to making bridge loans work is having a clear exit strategy before you close. The most common and profitable exit for rental property investors is the BRRRR strategy: Buy, Rehab, Rent, Refinance, Repeat. You acquire with bridge financing, complete renovations, stabilize with a tenant, then refinance into a 30-year DSCR loan at a fraction of the bridge loan rate.

The Smart Exit: Refinance into a 30-Year DSCR Loan

Once your property is stabilized and rented, a DSCR refinance lets you lock in a permanent 30-year rate based on the property's rental income. No income verification, no tax returns. If the rent covers the mortgage payment, you qualify. Most DSCR lenders will refinance up to 75-80% of the after-repair value, often allowing you to pull out much or all of your initial investment to redeploy into the next deal.