"interest only" development loan? - Posted by Philip

Posted by philip on June 20, 2003 at 11:38:15:

Yes this banker seems to be trying in some ways to help.
I thought it sounded like a good way to keep cash flow down, and I have the backup money, sooo…I will probably go that route…If I BUY!

“interest only” development loan? - Posted by Philip

Posted by Philip on June 18, 2003 at 23:31:52:

If I do a land/home deal in which I parcel off lots and put in more homes; I will have to develop the property, somewhat.

My banker said he thought the best thing to do in a case like this was to borrow it as “interest only” on the land for 1 year with a payment at 6 months and 12 months.

He knows I have sources of money outside the bank for the development, which banks don’t like to loan much against, anyway.

Then look at it again and see its value, and start a loan that would actually require paydown of the principal.

Is this a good idea?

Re: “interest only” development loan? - Posted by Lyal

Posted by Lyal on June 20, 2003 at 06:44:05:

I’d take notice of this offer just to register that your banker is willing to do something “creative”. I have done interest only loans in the past for rehab jobs etc and they work well. They conserve cash flow so you don’t get squeezed during the project. BUT keep in mind that it will cost you more in interest as you’ll be paying on the entire principal for the duration of the loan (not much difference really but some). My preference is for monthly payments as opposed to quarterly or bi-annual, just so you’re not looking at a big payment when it’s time, just easier for me to manage I guess (don’t seem to have the discipline to set some aside each month).
Sounds like a good opportunity if the numbers are right.
All the best, Lyal