A property with empty units cannot prove its rent yet, which makes long-term financing hard. A bridge loan finances it now, and a DSCR loan takes over once the units are leased.
In short: A bridge loan can finance a vacant or not-yet-leased rental or small multifamily property while you lease it up. Bridge rates start at 7.99%, interest-only payments are common, and loans start at $150,000. Once the property is rented, you refinance into a long-term DSCR loan that qualifies on the actual rent, with cash-out up to 75% of value. The plan works when the property can realistically be leased at a rent that covers a 30-year payment.
DSCR loans qualify on rent. A single-family home can often use market rent from the appraisal even when vacant. A small multifamily building with several empty units is different: there is no rent roll yet, and many long-term programs want to see income before they lend at full leverage.
A bridge loan looks at the property and the plan instead. It gives you time to make the units rent-ready, sign leases and show the income a long-term loan needs.
If the property needs a full gut rehab, a fix and flip or rehab loan with draws may fit better than a bridge.
This example is illustrative and not a quote. An investor buys a vacant fourplex for $480,000 and pays for light turn work in cash. A bridge loan at an illustrative 75% of the purchase price is $360,000. At a sample interest-only rate of 9.0%, the payment is $2,700 a month during lease-up.
The investor leases all four units at $1,450 each, for $5,800 a month. The property then appraises at $560,000. A DSCR cash-out at 75% is $420,000. At a sample rate of 7.25% on a 30-year fixed loan, principal and interest is about $2,865. With taxes and insurance of $900, the full payment is about $3,765 and the DSCR is about 1.54x.
The $420,000 loan pays off the $360,000 bridge. After sample closing costs of $11,000, about $49,000 comes back to the investor.
| Stage | Amount |
|---|---|
| Purchase price | $480,000 |
| Bridge loan (illustrative 75%) | $360,000 |
| Bridge interest-only payment at sample 9.0% | $2,700 per month |
| Rent after lease-up (4 x $1,450) | $5,800 per month |
| Value after lease-up | $560,000 |
| DSCR loan at 75% | $420,000 |
| DSCR after refinance | About 1.54x |
| Cash back after bridge payoff and sample closing costs | About $49,000 |
During lease-up, the bridge payment, taxes, insurance and utilities come out of your pocket because rent is low or zero. Add marketing, turn costs and a cushion for units that take longer to fill.
In the example, the bridge payment alone is $2,700 a month before any rent comes in. Multiply your monthly costs by a realistic lease-up period, then add a margin.
The refinance is the exit, so plan it before you close the bridge. Find out how the DSCR program will count rent, whether it needs a few months of rent deposits, and what seasoning applies. Seasoning varies by program; some lend on the new value with little seasoning and others cap the loan at cost until the property has been owned for several months.
Properties with five or more units are typically underwritten on net operating income instead of a simple rent-to-payment ratio. Our multifamily pages explain how that works.
Some bridge programs require no appraisal, which can speed up a purchase with a tight closing date.
Send the financing team the purchase price, unit count, current occupancy, expected rents and any turn work. We review your scenario and come back with options for the bridge and the DSCR refinance that follows.
On a single-family home, many DSCR programs can use market rent even when vacant. On a small multifamily with several empty units, a bridge loan through lease-up is often the cleaner path.
Bridge loans are short-term, and your lease-up plan should fit well within the loan's maturity. Ask the financing team about the term on the options we send.
Usually the signed leases, checked against the appraiser's market rent. Some programs use the lower of the two.
Yes, up to 75% of the new appraised value, as long as the rent covers the new payment at the program's minimum DSCR and any seasoning rule is met.
Bridge financing can work for small multifamily buildings. The long-term refinance on five or more units is usually based on net operating income.
Not quite. A fix and flip loan includes a rehab budget paid in draws. A bridge loan is simpler and suits properties that need little work before leasing.
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