Bridge Loan Due Diligence Checklist: What to Verify Before You Close

This checklist is for investors buying or refinancing investment property with bridge financing. It is general education, not legal advice. Your attorney, title company and inspectors are the right people for property-specific questions.

How is investor due diligence different from lender underwriting?

The lender asks whether the collateral and the plan support repayment. You need to know whether the deal makes money and whether anything could stop the plan. Those questions overlap, but they aren't the same. A lender may approve a loan on a property where your profit depends on a zoning use, a rent level or a renovation scope the lender never checked.

Bridge debt raises the stakes, because the maturity date doesn't wait. A surprise that costs three months on an all-cash deal costs three months of interest, and possibly an extension, on a bridge.

When should due diligence happen?

During the contract's inspection or due diligence period, before your earnest money becomes non-refundable. Put the deadline next to the lender's closing timeline. Bridge closings can be quick, and a short closing window gives you less time for inspections, so start them the day the contract is signed. See Axelrad Capital's Bridge Loans page for current program terms.

What are the most commonly missed items?

• Permit history. Unpermitted additions or conversions can affect value, insurance and the takeout lender.
• Code violations and open permits. These can fall on the new owner.
• Utility status. Shut-off utilities can delay inspections and work.
• Flood zone. Flood insurance changes both carrying costs and rent coverage for a rental takeout.
• Tax reassessment. A sale can trigger a higher assessment, which raises carrying costs and lowers DSCR.
• Occupancy. Existing tenants or occupants can change the timeline completely.

Who should be on your due diligence team?

At minimum: a title company or closing attorney, a qualified inspector, your contractor, and an insurance agent who writes policies for investment property. Depending on the deal, add a surveyor, an environmental consultant on older or commercial property, a property manager for rent comps, and your tax professional. Line them up before you go under contract, because a short bridge timeline doesn't leave room to search for help.

Bridge loan due diligence checklist

Tick each item as it is confirmed, section by section.

Example: one item changes the deal (hypothetical)

Example for illustration only.

An investor plans to convert a single-family house into a duplex and refinance as a two-unit rental. During due diligence, the city confirms the lot's zoning doesn't allow a second unit without a variance, which takes several months and isn't guaranteed. The bridge lender might still lend on the house. But the investor's exit, a two-unit rental refinance, no longer works on the original timeline. The zoning item on the checklist saved the deal, or at least the deposit.

Key takeaways

• Lender underwriting protects the lender. Your due diligence protects your plan and profit.
• Finish due diligence before your deposit goes hard and before a short bridge closing window.
• Zoning, permits, flood, taxes and occupancy are the items most often missed.
• Test the exit with lower numbers and a longer hold.
• Use professionals (attorney, title, inspectors) for anything legal or technical.

Close with fewer surprises

Done with your due diligence? Submit your bridge application with your findings, or review the Bridge Loans page. This is an educational checklist only, not legal advice.