Buy the Next Investment Property Before Selling the Last One

A bridge loan can tap equity in an investment property you already own, the one you're buying or both, so you can close on the next deal without waiting for a sale. When the first property sells, the proceeds pay off the bridge. The trade-off is carrying two properties at once.

The timing problem

Your capital is locked in a property you plan to sell. The next deal shows up now. Sales take time, and the next deal won't wait. Banks may balk at the extra debt or the timeline. A bridge loan solves the timing gap.

RSC Private Lending makes business-purpose loans only, so this is about investment property, not the home you live in.

Two ways to structure it

Lenders generally structure it one of two ways, and not every lender offers both:

• Secured by both properties. The lender takes a lien on the property you're selling and the one you're buying. More collateral can support a larger loan, but both are tied up until payoff or a release.
• Secured by one property. The loan sits on just the new property or just the existing one. Simpler, though it may not cover as much.

Some loans include a release clause, so selling the first property pays down the loan and frees it from the lien.

On RSC Private Lending's bridge program, a loan can go up to 85% LTV on a purchase, or up to 75% LTV on a cash-out refinance of a property you already own.

How it plays out

Example: You own a rental worth $500,000 with $150,000 left on its mortgage, about $350,000 in equity. You want a $450,000 fourplex closing in three weeks. A bridge loan secured by both properties pays off the old mortgage and funds most of the purchase. You list the rental. Four months later it sells, and the proceeds pay down most of the bridge. You then refinance the fourplex into long-term rental debt.

The risks

• Two sets of taxes, insurance and debt payments until the sale closes
• A slower sale than expected, which stretches the bridge term
• A lower sale price, leaving less to pay down the loan
• Pressure to accept a weak offer as maturity nears

Keep reserves for several extra months of carrying costs, and price the property you're selling realistically.

Set yourself up to win

• Get the existing property ready to list before you close the bridge.
• Use a realistic market analysis, not a hopeful price.
• Choose a term with room beyond your expected sale.
• Know your backup: rent it longer, refinance it or bring in other capital.

What this means for you

Buying before selling lets you move on the next deal without losing it to timing. It works best when the property you're selling is ready, fairly priced and in a market where homes move.

Have equity in one property and your eye on the next? Send RSC Private Lending your scenario for a term sheet in 24 hours. Subject to underwriting.