Keep Enough Cash for the Transition

MODULE 3 OF 4

Keep Enough Cash for the Transition

Short-term projects expose the investor to uncertain timing. Contractor delays, permitting, leasing and appraisal review can lengthen the holding period even when the property is sound. Bridge loans therefore require a liquidity plan that extends beyond the closing equity check. Show how monthly payments and property expenses will be covered before stabilized rent or sale proceeds arrive.

Budget carry using conservative assumptions. If an interest reserve is included, determine its size, eligible use and expected exhaustion date. It is borrowed money or allocated funds under the contract, not free profit. For rehab funding, coordinate contractor payments with reimbursement timing and retainage. The available loan commitment may not cover a cash shortage between inspection cycles.

Set early warning triggers. A missed construction milestone should prompt a revised schedule and cash forecast, not simply another optimistic completion date. Contact the lender before an extension becomes urgent, and confirm whether approval is discretionary. Changes in property insurance, taxes or leasing costs can compound delays. Keep liquidity assigned to this project separate from funds already committed elsewhere. The investor should be able to show enough available cash for a credible downside period while maintaining a realistic path to repayment, rather than depending on an extension that has not been granted.