What Is the Difference Between Bridge Finance and Lease Finance?

2 Mins read

There’s an important difference between financing and leasing an asset. It’s a matter of the ownership structure at the end of its term. If, for example, you plan on using property, equipment, or a vehicle and would prefer to return it when it’s no longer required, a lease could cover your needs. An asset that you wish to take long-term ownership of, however, may require an affordable loan arrangement like USDA home loans. In this case, you could do well to look into bridge financing.

When you need to leverage some equity in an existing asset that you currently own so you can purchase an additional one, a bridge loan could provide the short-term cash flow you require. For individuals low on cash in California, working with one of the Golden State’s hard money lenders can help make up for a gap in liquidity.

Owner-Occupied Real Estate Ownership

Do you plan to buy an owner-occupied property? When you need to do it quickly, hard money lenders Sacramento could help you meet your goals. The property that you plan to buy can be purchased at the time that you are ready, even if you don’t have the available cash. A 12-month bridge loan makes the funds available for you to take ownership of your target property without first selling any of your current property or assets to obtain the funding you need.

A bridge loan allows you to leverage the equity value in your existing property through qualified hard money lenders so you make your intended purchase. When your existing property or asset sells, you may then use the proceeds to pay off your bridge loan, which is usually due within one year.

Investment Income From a Rental Property

In some situations, lease financing could be a workable option when a California property looks like an opportunity to generate rental income. This may provide a way to lease the property and rent it out for income, but you would not take ownership at any time. This also means that you would not be able to do whatever you wish with the property, and you may need to pay the owner some of the proceeds from your rental revenue.

Utilities and other bills could also eat into your profit margin if the property’s owner requires you to pay them by yourself. This is a provision that would need to be outlined in your lease agreement. By instead working out a bridge loan arrangement with a hard money lender California property maintenance costs, such as water, electric and trash-pickup could become a tax write-off when you actually own the property.

Taxable Income Offsets

Property expenses, even though they represent tax write-offs, could nonetheless offset the rental revenue generated when you own the unit. A lease agreement, however, may not provide you with a sufficient number of deductions if you need help in lowering your tax liability.

Comparing the potential tax liabilities between leasing and ownership is an issue to consider when you’re deciding whether to lease or finance a property. By working with California’s hard money lenders to set-up a bridge loan that accommodates your needs, you may find there’s a way to obtain the best possible balance between your asset acquisition and tax liability objectives.


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Breanna, with the help and support of BeDoper's audience, provides fresh news on the tech and EdTech daily to your screen. Stay connected with Breanna on FB, Twitter, and Pinterest to spice up your feeds and productivate your time.
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