A bridge loan is short-term financing (often 1–3 years) used to acquire and reposition a property before refinancing into long-term debt. It typically carries a higher, often floating, rate but more flexibility — common for value-add deals during the renovation period.
Bridge debt lets an operator execute a business plan, then refinance once income has risen. The trade-off is interest-rate and refinance risk: if rates rise or the plan slips, the exit can get harder — which is why conservative sponsors stress-test the refinance.
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