Fast Track to Development: How to Add Value to Your Current Property Using a Commercial Bridge Loan
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May 24, 2024

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Does your existing commercial property need a major facelift?

These projects can significantly boost income and ROI, but they can take time to execute.

Hard money lenders can help you determine suitable financing types to plan, initiate, and complete a new construction project on an existing property.

Let’s take a look at how this can be accomplished.

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How does a commercial bridge loan work?

Commercial bridge loans from hard money lenders are quick, short-term financing that helps investors access the capital they need to move a project forward.

They are commonly used in the following scenarios:

  • Purchasing a property
  • Resolving temporary cash flow issues
  • Covering pre-development costs

The idea is that a bridge loan can “bridge the gap” between the funding you need now and the time you need to secure a more permanent source of financing.

If you already have a commercial property, you can use a bridge loan to quickly move on a construction project.

The bridge loan can cover the costs necessary to prepare for construction, such as:

  • Securing permits
  • Design work
  • Structural assessments
  • Preliminary construction work

What is a new construction loan?

New construction loans are specifically structured to cover the costs of constructing a new building or a significant redevelopment project. This also includes projects that require a significant interior remodel

Construction loans typically disperse funds in stages as the work progresses and certain milestones are completed.

Characteristics of new construction loans involve:

  • Interest-only payments during the construction phase
  • Detailed construction plans for the lender
  • Inspection process to release subsequent draws
  • Detailed budget with an itemized list of what has been spent to date and what is still needed to complete the project

After the new build or renovation is completed, new construction loans are generally paid off via the sale of the home or refinanced into a permanent mortgage.

Bridge to new construction: How to add value to an existing property

Adding value to an existing property can open up lucrative opportunities for investors.

If you have an existing commercial property that you want to add value to, take a look at how a bridge loan and new construction loan can help you accomplish your goals.

Step 1: Get a bridge loan

A bridge loan from a hard money lender will unlock access to immediate funds so you can move forward with your construction project and continue operations.

This loan can provide investors additional time and funding to secure permits, finalize design plans, put pre-leasing agreements, prepare the work site, or begin minor projects.

Step 2: Transition to a construction loan

The bridge loan phase helps borrowers prepare for the construction phase.

Once the conditions are fulfilled, you can apply for and secure your new construction loan from your hard money lender.

You will use the funds from the construction loan to carry out major construction activities, such as:

  • Building a new structure
  • Completing major renovations
  • Landscaping

Step 3: Complete construction and secure long-term financing

Once the new build is completed and operational, you can begin generating higher revenue.

You can repay the loan fully or refinance it into a long-term mortgage, reflecting the value boost.

Example scenarios for commercial bridge loans

The transition from bridge loans to construction loans is a common real estate investment strategy that can be applied across various commercial properties.

Let’s examine examples of how this strategy is executed in different real estate settings.

Retail center expansion

You own a retail center that is performing well, but you want to increase its value by adding a new building that accommodates more tenants and amenities.

In this scenario, a bridge loan can cover the site preparations, permits, and design plans before transitioning to a construction loan to build the new structure.

Office building addition

You own a mid-sized office building and want to add another floor as a co-working space.

The bridge loan will cover the architectural design, structural assessments, and expanding permits.

You can then apply for a construction loan to carry out the building. Once completed, it will attract new members and increase the building’s income and overall value.

Converting industrial warehouse to mixed-use development

You want to convert an aging industrial space into a mixed-use development with offices, retail, and residential lofts.

The bridge loan will cover the rezoning costs and preliminary construction work, and the construction loan will finance the extensive renovations.

Developing a boutique hotel

You purchased a historic building and want to convert it into a boutique hotel.

The bridge loan provides financing for your historic preservation permits and allows you to begin renovations while you seek a long-term partner in the hospitality industry.

The construction loan will complete the renovations.

How to get a commercial bridge loan to a new construction loan

The first step to getting a commercial bridge loan for a new construction project is to reach out to an experienced, reputable, hard money lender comfortable with structuring loans for these projects.

The Marquee Funding Group team wants to build a genuine partnership with our borrowers for years of projects.

Let’s examine the other steps in securing financing for these commercial building or expansion projects.

  1. Develop a detailed plan and comprehensive budget for your project
  2. Outline your expected ROI and plan for repayment, known as your exit strategy
  3. Submit your application with the required documentation and project details
  4. Receive your bridge funds
  5. Complete the initial phase of the project
  6. Transition to your new construction loan
  7. Efficiently manage your project phases and communicate regular updates to your lender
  8. Upon project completion, execute your exit strategy to repay your loans

Hard money loans offer investors the speed and flexibility to quickly move through their project timelines and maximize ROI.

You can’t find this level of flexibility and customization with traditional lenders.

Start your project with Marquee Funding Group

Marquee Funding Group serves those who are often overlooked by traditional channels.

We excel in structuring loans for even the most unique or complicated scenarios—it’s our specialty.

With Marquee, you’ll find:

  • Flexible loan products
  • Competitive pricing
  • Personalized service
  • Common-sense underwriting

Submit your loan scenario today to get started with your project, or call us at (818) 222-5222 for quick feedback on the viability of your deal.

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