Commercial Mortgage Quick Reference Guide
Click A Term Below
Commercial Bridge Loans
ADR: Average Daily Rate
CMBS and Conduit Loans CTL: Credit Tenant Lease Debt Service Coverage Ratio Debt Coverage Ratio Debt Yield
Gross Rent Multiplier
Gross Potential Rent
GLA: Gross Leasable Area
LIHTC Loan Constant
Recourse Loans TI/LC: Tenant Improvements/Leasing Commission
Skin In The Game
A multifamily bridge loan is a financial tool used by commercial property owners to bridge the gap between the moment they get the loan and the moment they can do what they want to do with the property. Multifamily and commercial real estate bridge loan terms are usually between 3 months and 3 years, most landing in the 12 – 24 month range. Now if this seems incomplete as a definition, please forgive the apparent vagueness, it’s just that a bridge loan can be used for so many things and so many reasons.
The most common uses of bridge loans are to quickly purchase a property when all cash isn’t an option. The frequent advantage to bridge loans is that they often close very quickly and are based more on the value of the property than anything else. Other types of loans are often heavily based on the income a property generates and heavy analysis. Because of this lack of necessity of analysis a bridge loan can close much faster than a traditional loan. This however comes at a trade off. Interest rates on bridge loans can be triple or quadruple market rates for conventional financing.
Another use of a bridge loan for a multifamily or other commercial property, would be for a substantial rehabilitation and stabialization prior to getting conventional multifamily financing. The bridge loan would be used to keep the property financed while finishing up the necessary upgrades and then likely leasing up the property. This can apply to most property types such as multifamily, retail, office, etc.
The gist is that bridge loans are usually for out-of-the-box, one-off type situations. Each borrower may have very unique circumstances, but bridge loans requirements remain pretty consistent at around 65% of the property value and a payoff date usually in less than three years.
Click the following link to find more information on bridge loan terms.
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