Private lending for 5 years

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Mike GrudzienPro Member
Lender · Eugene, OR · Member since 2019 · 2k+ posts · 1k+ votes
2mo

Private lenders are not permanent mortgage providers.  5 years is a long time.
Private lenders do 3 month, 6 month, maybe 1-2 years, rarely 3.
That is what the market is.  We don't tie up funds for that long.  Period.

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  • Mike GrudzienPro Member
    Lender · Eugene, OR · Member since 2019 · 2k+ posts · 1k+ votes
    2mo

    Private lenders are not permanent mortgage providers.  5 years is a long time.
    Private lenders do 3 month, 6 month, maybe 1-2 years, rarely 3.
    That is what the market is.  We don't tie up funds for that long.  Period.

    3Reply
  • Mike GrudzienPro Member
    Lender · Eugene, OR · Member since 2019 · 2k+ posts · 1k+ votes
    2mo

    P.S. For a Biggerpockets professional, you have a very, very blank profile......

    0Reply
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    2mo
    Quote from @James Flores:

    Is anyone doing Pml for a 5 year term? If you aren't why not?


     I see this more common in large scale developments, land loans and commercial properties. It makes no sense to do it on a 1-4 Unit residential deal. 

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    1Reply
  • Doug SmithPro Member
    Lender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes
    2mo

    Some do. If you underwrite it and structure it correctly, you might even be able to sell it if you need to. If you have a mortgage broker or lender's license, you can even table fund it to someone else if you don't want to hold it. I think it really depends on what you're seeking to do...churn your money or get a steady return with a good payer. There's nothing that says you can't hold or sell for a longer-term deal. What is it your trying to accomplish as a lender?

    1Reply
  • Scott WolfPro Member
    Lender · Boca Raton, FL · Member since 2014 · 1k+ posts · 958 votes
    2mo
    Quote from @James Flores:

    Is anyone doing Pml for a 5 year term? If you aren't why not?


    What's the goal? Is it for a rehab project, or instead of a DSCR loan?

    If instead of DSCR, why the hesitance to use DSCR lenders?

    0Reply
    • James Flores
      OP
      Member since 2026 · 23 posts · 12 votes
      2mo

      What I am exploring is buying a property funded by a PML and paying it off in 5 years (60K condo). While offering it to a buyer with seller financing, so after the 5 year mark I own it from the PML but my end buyer is on a 30 year note with me. 

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  • James Driscoll
    Banker · MA · Member since 2026 · 120 posts · 33 votes
    1mo

    The last reply asks the right question. If the goal is buy-and-hold on a stabilized rental, a 5-year private note puts the borrower on a clock that a DSCR loan doesn't, and the rate spread on a private deal at that term usually runs 3 to 5 points higher than a 30-year DSCR product for no structural benefit. DSCR loans close on the property's cash flow, not the borrower's tax returns, which is the same reason most investors reach for private money in the first place. The private route makes more sense when a property can't qualify on DSCR yet, maybe it's vacant, mid-rehab, or the numbers are thin and need 12 months to season. But if it's already performing and you're just trying to avoid a conventional income doc process, DSCR solves that without the 5-year balloon hanging over you. Private lenders who are willing to hold 5 years are out there, but they're going to price in that illiquidity, and borrowers are usually surprised by what that actually costs. The better frame for the original question is probably: what's the obstacle to conventional or DSCR financing, because the answer to that shapes whether a 5-year private note is creative or just expensive.

    James Driscoll

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