Commercial Rehab Loans — How Value-Add CRE Financing Works (2026)

Investors pursuing commercial rehab loans and value-add CRE financing need to understand LTC on the way in, LTV on the way out — the same bridge-to-perm logic as mobile home parks and RV parks, applied across asset classes.

Hub: commercial property loans by asset class · bridge loans

Value-add vs stabilized acquisition

	Stabilized	Value-add / rehab
Underwriting	T-12 NOI	Business plan + pro forma
Leverage	LTV on appraised value	LTC on cost stack
Timeline	Close and hold	12–24 month reposition
Risk	Market / tenant credit	Execution + lease-up

LTC vs LTV — worked example

Strip center acquisition + TI:

Line	Amount
Purchase	$1,200,000
TI / CapEx	$280,000
Total cost (LTC basis)	$1,480,000
Bridge at 68% LTC	$1,006,400
Stabilized value (18 mo)	$1,750,000
Refi at 70% LTV	$1,225,000 — pays off bridge + returns equity

Draw schedule — how CapEx releases

Draw	Trigger	Typical % of holdback
Draw 1	Lease executed + TI start	25%–30%
Draw 2	Midpoint inspection	30%–40%
Draw 3	Substantial completion	Balance
Final	CO / tenant open	Retainage release

Similar to fix and flip draw process but scoped to TI, building systems, and common areas.

Asset-class rehab notes

Asset class	Common CapEx	Spoke page
Hotel / motel	PIP, FF&E	Hotel financing
Industrial	Dock, clear height, roof	Industrial loans
Retail	TI, facade, parking	Retail strip center
Self-storage	C&S conversion	Self-storage
MHP	Pad fill, utilities	MHP financing
RV park	PIP, pad electric	RV park financing

Bridge-to-perm exit paths

Asset	Permanent exit
Multifamily 5+	Agency (Fannie/Freddie), CMBS
Retail / office	CMBS, bank
Industrial	Bank, CMBS
Hotel	CMBS, bank
Owner-occupied	SBA 504 / 7(a) — bridge now SBA later
MHP	Agency MHC, community bank
RV park	SBA 7(a), bank

When bridge rehab beats bank renovation

Signal	Bridge	Bank
Occupancy under 70%	Yes — underwrite to pro forma	No — needs T-12 NOI
Close in 30 days	Yes	Rarely
Heavy TI before lease-up	LTC on cost stack	Limited renovation appetite
Sponsor self-employed	Asset-based	Full personal financials
Stabilized 85%+ occ	Overpaying on rate	Bank wins

Common value-add mistakes

Mistake	What happens	Prevention
Refi too early	Permanent lender declines — needs T-12, not pro forma	Wait for 80%+ occupancy and 1.25x DSCR on trailing NOI
Under-budgeting TI	Bridge extension at 11%–13% IO — erodes equity	Add 15%–20% TI contingency on retail/office
Mixing LTC and LTV	Surprise equity call at refi	Size bridge to cost; size exit to stabilized value
Skipping debt-service reserve	Extension denied when lease-up slips	Budget 3–6 months PITIA in loan structure
Ignoring asset CapEx milestones	Draw delays on hotel PIP, MHP pads, industrial docks	Match draw schedule to asset-specific scope

Asset-specific CapEx detail lives on each hub — not duplicated here: hotel PIP · MHP pads · SBA exit path: bridge now SBA later

Sponsor profile — who bridge rehab fits

Sponsor	Typical deal	Bridge advantage	Permanent exit
First-time value-add buyer	Sub-$2M strip with vacancy	Underwrites to pro forma — banks won’t	CMBS or bank at stabilization
Self-employed operator	Owner-occupied warehouse + TI	Asset-based — minimal personal P&L	SBA 504 after 24-month occupancy
Experienced syndicator	60% occupied multifamily	Speed on off-market — 30-day close	Agency refi at 80%+ occ
MHP/RV operator	Turnaround park 65% occ	Bridge on projected NOI	Agency MHC or bank at 80%+
Hotel reflag	Independent → flagged PIP	LTC on FF&E + PIP scope	CMBS once ADR stabilizes

Worked example — hold vs flip exit on same strip center

Using the $1.48M cost stack above: bridge at 10.5% IO costs $105K/year during the 18-month reposition. If the sponsor sells stabilized at $1.75M instead of refi, equity return depends on execution — but a DSCR hold at 70% LTV / 7.25% ($89K annual DS) only works if rent roll supports 1.25x on T-12. Run both exits before signing the bridge term sheet. DSCR hold rates: 5.75%–10.5% — see DSCR loans for rental CRE that qualifies.

Jaken commercial bridge terms

Parameter	Range
Rates	8.99%–13.5% IO
LTC / LTV	65%–75% — varies by asset
Term	12–24 months
Coverage	All 50 states

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