Real-estate investors who took bridge loans during the pandemic got trapped when interest rates spiked in 2021-2022. Three-year loans from Freddie Mac and Fannie Mae looked cheap at first, but rising rates made refinancing impossible before the financing expired, killing value-add deals mid-project.
And, you know, hey, ask anybody that got caught out doing a value-add during COVID Was that a big surprise? Yeah, absolutely.
You know, even, you know, even the biggest where people got caught, you know, in 2021, 2022 was because of the bridge financing came below Freddie Mac and Fannie Mae, you know, the rates, which never happened before. And they were, they were getting their deals to pencil out. But the problem was, is that financing was short-term. It was only good for 3 years. So, the big risk was, you know, as long as the rates didn't go up, they were okay, you know, or if they could execute that value add in time before any rates might have gone up, they were okay. But in a lot of cases, the rates went up, you know, and caught everybody by surprise. You know, my favorite saying is, at a low tide, the naked man becomes exposed. So, watch, watch the risk that you're taking on.
