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Bridge Loan Real Estate Playbook: From Distressed Buy to CMBS Exit in 18 Months
George Tsividakis
May 23, 2025
How to turn a neglected asset into institution-grade collateral—and pocket six-figure equity along the way.
Quick-View Timeline
Month | Milestone | KPI Target |
|---|---|---|
0–2 | Close bridge loan & fund CapEx escrow | 75–80 % LTC, rate 10–11 % |
3–9 | Renovate / re-tenant | Occupancy ↑ to 85 %+ |
10–14 | Stabilize NOI, prove 3-month trend | DSCR ≥ 1.30 on pro-forma debt |
15–18 | Lock CMBS terms, close permanent take-out | 10-yr fixed ≤ 6.75 %, 65 % LTV |
1 | Why a Bridge-to-CMBS Strategy?
Speed – Bridge lenders fund in 10–14 days; distressed sellers rarely wait for bank committees.
Flexibility – Interest-only draws for CapEx, interest reserves, and light covenants.
Scalability – A CMBS exit unlocks lower fixed rates, non-recourse structure, and frees liquidity for the next play.
2 | Finding the Right Distressed Target
Asset Types: 25–100-unit multifamily, light-value-add retail strips, older self-storage, or flagged hotels under 65 % occupancy.
Discount Range: Aim for 25–35 % under stabilized value; rehab budget ≤ 20 % of purchase price.
Red-Flag Filters: Environmental issues, functional obsolescence, or markets with negative net migration.
3 | Structuring the Bridge Loan
Factor | LoanFunders.com Target | Why It Matters |
|---|---|---|
LTC | 75–80 % of total cost | Leaves buffer for overruns |
Term | 12 mos + 6-mo extension | Aligns with 18-mo CMBS plan |
Interest | 10–11 % I/O | Reserve funded at close |
Draws | 48-hr turnaround | Keeps contractors moving |
Covenants | Light DSCR tests post-Month 9 | Ensures sprint to stabilization |
Tip: Build a line-item CapEx budget (roof, HVAC, unit turns) upfront; lenders wire draws faster when scope is crystal-clear.
4 | The 6-Month Reposition Sprint
A. CapEx Execution (Months 3–6)
Roof, mechanicals, curb appeal first—signals momentum to tenants & appraisers.
Unit turns in 30-day micro-batches to maintain cash flow.
B. Lease-Up & Rent Re-Set (Months 4–9)
Incentivize early renewals with minor concessions.
Implement RUBS or utility bill-back for instant NOI bump.
Goal: Hit 85 %+ occupancy and prove pro-forma rents in place by Month 9.
5 | NOI Stabilization & CMBS Readiness
Metric | CMBS Threshold | Your Target |
|---|---|---|
Occupancy | 90 % trailing 90 days | 93 %+ |
DSCR (stressed) | ≥ 1.25 | 1.30–1.35 |
Seasoning | 3-6 months | 4+ months of trend |
Pre-Exit Checklist:
Two trailing-12 P&Ls (pre- & post-rehab).
Updated rent roll with market-supported increases.
Third-party management agreement (if < 100 units).
Clean title; any liens cured.
6 | Locking the CMBS Take-Out
Engage an experienced CMBS correspondent by Month 12—let them monitor NOI trend.
Rate & Spread: July 2025 desk levels show SOFR swap 10-yr 4.1 % + 270 bps = ~6.8 % coupon.
Loan-Sizing: Lower of 65 % LTV or 1.25× DSCR; run both to find max proceeds.
Non-Recourse Carve-Outs: Standard bad-boy guarantees only—builder risk now behind you.
Timeline:
Application to term sheet: 10 days
Appraisal/engineering: 15 days
Securitization close: 30–40 days
Result: Bridge retires; interest reserve unused funds released to you at closing—instant equity pop.
7 | Sample Deal Math
Item | Amount |
|---|---|
Purchase Price | $4.5 M |
CapEx Budget | $600 K |
All-in Cost | $5.1 M |
Bridge Loan (78 % LTC) | $4.0 M |
Cash In | $1.1 M |
Stabilized NOI | $550 K |
CMBS Refi (65 % LTV on $7 M value) | $4.55 M |
Bridge Payoff | –$4.0 M |
Cash-Out Proceeds | $550 K |
Equity Left | Original $1.1 M → now worth $2.45 M (CMBS) |
18 months: 2.2× equity multiple and long-term, non-recourse debt locked.
8 | Pitfalls to Dodge
Scope Creep: Stick to high-ROI CapEx; marble lobbies don’t raise NOI.
Occupancy Stall: Hire leasing pros early; vacant units bleed DSCR.
Permit Delays: Pre-file and grease municipal wheels before closing.
Rate Whiplash: Purchase a CMBS rate cap (25–50 bps) if Treasury spikes worry you.
9 | How LoanFunders.com Makes It Happen
Stage | Our Role | Speed Advantage |
|---|---|---|
Bridge | 15-day close, 48-hr draws | Win the distressed bid |
Weekly Check-Ins | NOI tracking dashboard | Spot seasoning gaps early |
CMBS Exit | Introduce correspondent partner | One-touch file hand-off |
Broker Support | White-label all docs | You keep the client, we do the work |
10 | Ready to Run the 18-Month Play?
A distressed seller is waiting—and so is your next equity pop. Line up bridge capital that closes fast and a CMBS partner who refinances on autopilot.
From “ugly duckling” to Wall-Street paper—let’s script your next 18-month success.