FINANCING GUIDE
How Bridge Loans Work in Real Estate
Bridge loans provide short-term capital before stabilization, sale or permanent refinancing.
In this guideWhat the analysis measuresCalculation frameworkUnderwriting reviewHow to use the result
What the analysis measures
Bridge facilities are often interest-only with fees, extension tests and a maturity balloon. The exit plan is therefore central to underwriting.
Calculation framework
Size proceeds against as-is value, cost basis and projected stabilized value, while distinguishing initial funding from future capex advances.
Underwriting review
Model floating rates, interest reserves, renovation draws, covenants and extension costs. A delayed business plan can consume both reserve and term.
How to use the result
Assess the take-out refinance under downside NOI and value. A bridge loan is not low risk merely because the opening LTV is modest.