Bridge Loan Real Estate Playbook: From Distressed Buy to CMBS Exit in 18 Months
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?
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Speed – Bridge lenders fund in 10–14 days; distressed sellers rarely wait for bank committees.
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Flexibility – Interest-only draws for CapEx, interest reserves, and light covenants.
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Scalability – A CMBS exit unlocks lower fixed rates, non-recourse structure, and frees liquidity for the next play.
2 | Finding the Right Distressed Target
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Asset Types: 25–100-unit multifamily, light-value-add retail strips, older self-storage, or flagged hotels under 65 % occupancy.
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Discount Range: Aim for 25–35 % under stabilized value; rehab budget ≤ 20 % of purchase price.
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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)
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Roof, mechanicals, curb appeal first—signals momentum to tenants & appraisers.
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Unit turns in 30-day micro-batches to maintain cash flow.
B. Lease-Up & Rent Re-Set (Months 4–9)
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Incentivize early renewals with minor concessions.
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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:
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Two trailing-12 P&Ls (pre- & post-rehab).
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Updated rent roll with market-supported increases.
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Third-party management agreement (if < 100 units).
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Clean title; any liens cured.
6 | Locking the CMBS Take-Out
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Engage an experienced CMBS correspondent by Month 12—let them monitor NOI trend.
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Rate & Spread: July 2025 desk levels show SOFR swap 10-yr 4.1 % + 270 bps = ~6.8 % coupon.
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Loan-Sizing: Lower of 65 % LTV or 1.25× DSCR; run both to find max proceeds.
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Non-Recourse Carve-Outs: Standard bad-boy guarantees only—builder risk now behind you.
Timeline:
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Application to term sheet: 10 days
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Appraisal/engineering: 15 days
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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
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Scope Creep: Stick to high-ROI CapEx; marble lobbies don’t raise NOI.
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Occupancy Stall: Hire leasing pros early; vacant units bleed DSCR.
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Permit Delays: Pre-file and grease municipal wheels before closing.
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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.