Loan structure with interest-only period during year tenant vacates
Two tenant building, one tenant vacates during Year 3. Was shown a loan structure where the lender would do 12-months interest-only during Year 3 to account for the releasing of the unit and upfits. So, two years P&amp;I, one year I/O, and two years P&amp;I before maturity. Is this common? Is this prudent?
[{"id": "i5nxg1p", "text": "It's unusual but not inherently risky. The only downside is that during the I/O period, you won't be making any principal payments, so if your goal is the pay it off as soon as possible, this structure wouldn't be as conducive as an consistently amortizing note.", "replies": [], "depth": 1}, {"id": "i5u8meu", "text": "Sounds pretty good actually. Gives you the flexibility if someone leaves. Don\u2019t over think it.", "replies": [], "depth": 1}, {"id": "i637e6m", "text": "Not common but lender seems to be helping you out. It\u2019ll make it easier to service the debt on I/o in year 3. Depending on what covenants they have it may make it less likely to have a technical default on dscr.", "replies": [], "depth": 1}]