Real estate just like every other venture requires funds to take off. However, getting the said funds for this venture is not really as complicated as one may want to believe. All you need to do is to understand the type of financing to get your real estate venture started.
There are a couple of ways you could go about real estate financing. These ways depend upon the type of financing you require and they are discussed here.
This is the type of real estate financing that is made use of to fill gaps in terms of liquidity hence the name. when the monetary proceeds from the sale of a property are expected after the outlay for buying a property, a bridge loan is requested for the purpose of maintaining liquidity and also to cover whatever initial cash outlay that may exist.
There are basically two forms of bridge financing; open bridging and closed bridging. Closed bridging financing talks about a financial situation where there is a specified date for the exit of the financing. The period of the loan puts less risk on the lender which is the reason why they usually have lower rates of interest.
Open bridge financing on the other hand simply talks about almost the direct opposite situation. In this type of financing, the borrower is usually unable to ascertain an exact date of exit at the material time due to the fact that the borrower is still looking for a buyer for the initial asset. This puts a whole lot of risk on the lender, which is why they have a higher rate of interest.
This is the type of real estate financing method of asset-based borrowing in which the borrower receives money that is secured via collateral in form of a real asset. They are quite similar to bridge loans as far as their borrower costs and lending criteria are concerned, however, they are different based on the fact that they usually involve a distressed financial situation such as bankruptcy or foreclosure. Owing to the fact that hard asset loans are secured on the real value of the real assets, it usually requires fewer credentials.
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