If I was going into the business of making “bridge loans” to buyers of property that can’t qualify to purchase until a certain event happens (i.e. sale of property they already own), no matter WHAT the level of leverage, I would invest only on the following conditions:
1. The collateral would be something I would want to own for the long haul just in case I couldn’t sell it;
2. I would first pencil out the trustees fees before deciding how much to lend, in case I had to foreclose;
3. The collateral would be VERY locally situated in case I found myself having to manage it (i.e. apt. bldg/commercial);
4. If the collateral was multi-family or commercial, I would first examine the ACTUAL LEASES and RENT RECEIPTS of the SELLER before deciding how much to lend;
5. I would examine the transfer disclosure statement and insist the borrower provide me with an inspection report from HIS/HER inspector. If the borrower sought me out before inspection and I was interested in making the loan, I would accompany the inspector.
6. I would stick with making loans ONLY on property located in areas I know well and was intimately familiar with.
I’m sure you are all aware of the many things that could go wrong which would prevent a borrower seeking a C,D paper/hard-money/bridge loan from performing on their end, no matter how good of a job or credit report they currently have.
