Bridge Loans: A Primer for Commercial Real Estate Investors


A fix and flip loan is a short-term loan provided to real estate investors to purchase and renovate a property that they then sell for a profit. Fix and flip loans also go by the names swing loans, bridge loans, gap financing or interim financing. These loans are a good option for investors who need immediate access to funds. Something unique to these loans is the fact that the collateral can be the estimated value of the property once it is remodeled. This is done in two ways: by using either the after repair value or the loan to cost ratio to determine the amount you can borrow.

After Repair Value (ARV) Loans

This fix and flip option is best for properties that will greatly increase in value after their remodel. The lender will determine whether or not an ARV loan is a good fit by researching your investment calculations and estimated selling price. Commercial real estate investors who qualify for ARV loans typically expect their property to increase around 50 to 100 percent of the price that they paid for the property. Most ARV loans are valued at around 65 to 70 percent of the property’s projected value after remodel. 

Loan to Cost (LTC) Ratio Loans

LTC ratio loans are a good option for properties that will not have as high of a profit margin as properties that qualify for ARV loans. LTC ratio is the metric used to compare the amount of the loan to the cost of the investment property and gives lenders an idea of the risk they are undertaking by providing the loan. 

For both ARV and LTC loans, you will have to put up a small portion of the property’s cost not covered by the loan yourself. You can be confident that HML Solutions will determine whether an after repair value loan or a loan to cost ratio loan is right for you. 

Rates for Bridge Loans

Fix and flip loan rates can vary considerably and depend on such factors as the type of lender or whether the loan is from private money, hard money or a bank. The terms of the loan will also vary by lender, so most commercial real estate investors will do some shopping around before working with a fix and flip lender. HML Solutions knows that you have many options of where to obtain a bridge loan, so we strive to provide the best rates and terms possible. 

Whether you choose an after repair value loan or a loan to cost ratio loan, and the amount of loan you choose to undertake, is largely dependent on the needs of your property and remodel and on your personal financial risk. A loan specialist can talk you through all of these factors. 

Contact Us Today!

It can be difficult for commercial real estate investors to know whether or not they are getting the best deal on a loan. Speak to a professional loan servicer at HML Solutions today to apply for and receive a quick fix and flip loan for your next real estate investment. 

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