Residential Transition Loans – RTL Loans

What Are Residential Transition Loans?

Residential transition loan is a broad term that may refer to various other specific loan programs such as fix and flip loans, rehab loans, construction loans, residential bridge loans (primary residence), or renovation loans. In general, the use of a residential transition loan is to quickly acquire the residential property and then either improve the property and sell, or obtain long-term permanent financing.

Residential transition loans allow a real estate investor to use leverage to acquire a property instead of purchasing the property for all cash. This allows the real estate investor to invest more into the subject property or use the cash to purchase additional projects elsewhere. Ultimately, transitional loans for real estate provide the investor with fast and flexible funding to successfully complete their real estate project. RTLs can be used to maximize investor profits by taking on additional projects, but the investor must ensure they are not over-leveraging and taking on too much at once.

Residential Transition Loan Lenders

Residential transition loan lenders are typically private money lenders who primarily specialize in short-term lending secured by residential real estate. They are able to fund within 1-2 weeks while traditional lenders may take 30 days or longer.

RTL lenders are also able to provide more flexible financing if the property has issues that can be resolved quickly or if the borrower has less than perfect credit. Many properties in need of a full renovation will not qualify for a traditional loan due to the property’s current condition.

Traditional lenders are mainly focused on long-term loan products such as 15 and 30 year terms and will be less interested or unable to fund for a 12-36 month term.

Applying for Residential Transitional Loans

The application process with a residential transition loan lender should be quick and straightforward. The real estate investor will need to submit application forms and provide information about the subject property and scope of the project. The real estate investor should have a general idea of the renovation costs for the project as well as an estimated value of the property once the rehabilitation of the property is completed. The lender will need to ensure the investor’s budgets and projections are reasonable.

The RTL lender should be able to review the application and project and provide preapproval to the investor within 1-2 days. As long as the investor has the sufficient funds for a down payment, rehab costs, holding costs and a contingency fund, the lender should be able to provide the initial funding for the purchase.