Looking for private lender open to deferred payments.

Investor · Boston, MA · Member since 2015 · 3 posts · 1 vote

Hi everyone,
I’m at Massachusetts base real estate investor actively inquiring value-add residential properties preferably small multifamily. I’m currently looking to connect with lenders open to deferred payment or interest accrual structures. (No monthly payments; interest paid at payoff). What are your recommendations? I’ve only heard of this a few times in the past.

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Stuart UdisPro Member

Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes

9mo

Why does it have to be a private lender? Plenty of banks offer construction loans where interest reserves are capitalized. Much lower cost of capital as well. Normally 1 point on the origination and interest rate WSJ Prime +1% floating.

Here's an example pulled from a term sheet for a current project of mine.

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Mike GrudzienPro Member
Lender · Eugene, OR · Member since 2019 · 2k+ posts · 1k+ votes
9mo
Experience level?
How many flips?
How many successes?
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Stuart UdisPro Member
Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
9mo
Why does it have to be a private lender? Plenty of banks offer construction loans where interest reserves are capitalized. Much lower cost of capital as well. Normally 1 point on the origination and interest rate WSJ Prime +1% floating.

Here's an example pulled from a term sheet for a current project of mine.

[email protected]
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Chris SeveneyBusiness Member
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
9mo
No monthly payments and paid at payoff is going to be little challenging. Not impossible but limits your pool of lenders and costs you more in long run
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- Patrick MalcolmPro Member
  OP
  Investor · Boston, MA · Member since 2015 · 3 posts · 1 vote
  9mo
  @Chris Seveney I’m not looking for a private lender specifically. I’m simply seeking a lender or someone with experience in dealing with lenders who offer similar terms or even more favorable terms.
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- Michael Wyatt
  Lender · Boston, MA · Member since 2021 · 125 posts · 64 votes
  9mo
  Hey Patrick, I do know of an option that defers payments for 6mo and rolls lender fees into the loan, so you bring a little less to close. Shoot me a DM if you're interested or have a deal and I'll take a look.
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- Josh Garcia
  Rental Property Investor · Member since 2023 · 14 posts · 5 votes
  9mo
  Quote from @Michael Wyatt:
  
  Hey Patrick, I do know of an option that defers payments for 6mo and rolls lender fees into the loan, so you bring a little less to close. Shoot me a DM if you're interested or have a deal and I'll take a look.
  
  Hey Michael, I'm a few new construction projects I'm doing in RI. Do you lend in RI?
  0 Reply
- Michael Wyatt
  Lender · Boston, MA · Member since 2021 · 125 posts · 64 votes
  9mo
  Quote from @Josh Garcia:
  
  Quote from @Michael Wyatt:
  
  Hey Patrick, I do know of an option that defers payments for 6mo and rolls lender fees into the loan, so you bring a little less to close. Shoot me a DM if you're interested or have a deal and I'll take a look.
  
  Hey Michael, I'm a few new construction projects I'm doing in RI. Do you lend in RI?
  Not right now sorry!
  
  I have a map on this link:
  https://www.mjwrealestate.net/loans
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- Josh Garcia
  Rental Property Investor · Member since 2023 · 14 posts · 5 votes
  9mo
  Quote from @Michael Wyatt:
  
  Quote from @Josh Garcia:
  
  Quote from @Michael Wyatt:
  
  Hey Patrick, I do know of an option that defers payments for 6mo and rolls lender fees into the loan, so you bring a little less to close. Shoot me a DM if you're interested or have a deal and I'll take a look.
  
  Hey Michael, I'm a few new construction projects I'm doing in RI. Do you lend in RI?
  Not right now sorry!
  
  I have a map on this link:
  https://www.mjwrealestate.net/loans
  
  No worries, thanks for the quick response.
  0 Reply
Lien VuongBusiness Member
Real Estate Agent · Boston, MA · Member since 2018 · 2k+ posts · 1k+ votes
9mo
Rolling in interest reserves is the answer to this. Your deal has to pencil in terms of the equity in the deal but if you can prove the value its a very normal circumstance and something that a lot of HMLs can offer.
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- Josh Garcia
  Rental Property Investor · Member since 2023 · 14 posts · 5 votes
  9mo
  Quote from @Lien Vuong:
  
  Rolling in interest reserves is the answer to this. Your deal has to pencil in terms of the equity in the deal but if you can prove the value its a very normal circumstance and something that a lot of HMLs can offer.
  
  Do you lend in RI on new construction?
  0 Reply
- Lien VuongBusiness Member
  Real Estate Agent · Boston, MA · Member since 2018 · 2k+ posts · 1k+ votes
  8mo
  Quote from @Josh Garcia:
  
  Quote from @Lien Vuong:
  
  Rolling in interest reserves is the answer to this. Your deal has to pencil in terms of the equity in the deal but if you can prove the value its a very normal circumstance and something that a lot of HMLs can offer.
  
  Do you lend in RI on new construction?
  
  I'm not a lender but happy to refer you to someone in RI that I know well. Feel free to DM!
  [email protected]
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Jeff S.
Lender · Los Angeles, CA · Member since 2009 · 1k+ posts · 2k+ votes
9mo
Lenders aren’t all the same, @Patrick Malcolm. Many obtain their funds from investors or institutions, so they need your payments to meet their own obligations. Some lenders additionally use your payment history to detect issues. Missed payments can indicate a borrower who is in trouble. Smaller, direct lenders are often more flexible because they use their own money and set their own terms.

Direct lenders (AKA balance sheet lenders) fund loans themselves, though some syndicated funds can also claim that label, which is why it’s important to ask where a lender’s money comes from and whose rules they follow.

For example, like just a few others on this board, we lend only our own money and allow deferred payments for experienced, well-capitalized local borrowers. Interest still accrues on unpaid payments, so it costs more over time, but usually not much more when you run the numbers. (Not a solicitation. We only lend in the L.A. area.)

If you’re deferring payments to preserve capital across multiple projects, that’s reasonable. If you’re asking because you can’t afford the payments, then perhaps you are undercapitalized and need to save more money or find a partner. As Bob Hope said, “A bank is a place that will lend you money if you can prove that you don’t need it.”
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Wale LawalBusiness Member
Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
9mo
@Patrick Malcolm
In Massachusetts small multifamily, it is frequently referred as “deferred interest” or “accrual” loan what you are depicting and it is typically provided by private money lenders instead of traditional banks. I think initially you should make connections with local hard money lenders, private equity groups or real estate syndicators who are aware of value add deals they are more adaptable with structures like interest only or deferred payments.
Good luck!
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Doug SmithPro Member
Lender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes
9mo
Most of us do that. We just show "prepaid interest" in the settlement statement for a period of time...3-6 months usually...and voila!...payment deferred.
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Matthew Bernal
Investor · Austin, TX · Member since 2021 · 497 posts · 127 votes
9mo
Would love to help you out with this. Let's connect.

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