Why consider a bridge loan for multifamily deals

Speed to close: Bridge loans close faster than many conventional multifamily loans because underwriting focuses on collateral and exit plan rather than lengthy debt-service history.
Fix-and-refinance or lease-up: Use a bridge loan to fund renovations or stabilize occupancy before moving to long-term financing.
Competitive markets: If a deal requires a quick, non-contingent close, a bridge loan can beat competing offers.

When a bridge loan is the right choice

Use a bridge loan when at least one of these applies:

You must close quickly to secure an off-market or time-sensitive property.
The property needs renovations or lease-up to qualify for permanent financing.
You have a clear exit (refinance, sale, or conversion to a long-term loan) within 6–18 months.
You can cover higher interest and fee costs during the short term.

Typical terms and costs (what to expect)

Loan-to-value (LTV): commonly 50%–75% of appraised value for multifamily, though exact LTV varies by lender and property condition.
Term: usually 6–18 months; many deals target 6–12 months to minimize interest carry.
Interest rates & fees: higher than permanent loans — often fixed or floating rates that run several percentage points above long-term mortgage rates plus origination and exit fees. (Market conditions in 2025 have pushed short-term rates higher than prior years.)
Collateral & covenants: loans are typically secured by the acquired property; some lenders require personal guarantees or cross-collateralization with other assets.

How lenders underwrite bridge loans

Lenders focus on collateral value, exit strategy, and sponsor track record more than long-term debt-service coverage. Key underwriting items include:

Appraisal and market comparables
Renovation budget and timeline (if rehab is involved)
Borrower/investor track record and liquidity
Clear exit plan (refinance commitment, sale timeline, or permanent loan pre-approval)

Decision checklist before using a bridge loan

Confirm a realistic exit: lender-ready refinance, buyer pipeline, or sale timeline.
Stress-test cash flow: can you cover higher interest, reserves, and unexpected cost overruns?
Get term quotes from multiple lenders (local banks, specialty bridge lenders, and private capital).
Review all fees and prepayment/exit penalties.
Consider cross-collateral or personal guarantees and how they affect your portfolio.

Real-world scenarios (brief)

Acquisition to refinance: Investor buys a 30-unit at a discount needing minor rehab; bridge loan funds purchase, then the investor refinances to a 10-year conventional loan after stabilizing occupancy.
Renovation/Value-add: Sponsor acquires a distressed 50-unit, uses bridge capital for renovations and re-tenanting, then executes a long-term permanent loan once NOI improves.

Common pitfalls to avoid

No clear exit: the most frequent cause of trouble is relying on an uncertain refinance or sale.
Underestimating holding costs: interest, taxes, insurance, and renovation overruns add up.
Single lender dependency: get multiple term sheets so you’re not pressured into unfavorable exit fees.

How to qualify and prepare (practical steps)

Assemble a concise package: property appraisal, pro forma, renovation scope, contractor bids, borrower resume, and proof of reserves.
Talk to lenders early about acceptable exits and typical LTVs for your property class.
If you own other assets, discuss cross-collateral options to improve pricing.

When to Use a Bridge Loan for Multifamily Property Acquisitions

When should you use a bridge loan for multifamily property acquisitions?