Loan Terms That Can Make or Break Your Real Estate Deal

In this episode, Jason Williams and Frank Patalano continue their financing series by breaking down the loan terms that investors often overlook but can dramatically impact a deal. From Dutch loans and prepayment penalties to recourse clauses and reserve requirements, they explain how these details affect leverage, risk, and profitability. This conversation highlights why understanding the fine print of lending agreements is just as important as negotiating the interest rate.

Topics Covered

• Understanding Dutch loans and why paying interest on unused funds can impact your returns
• How loan to cost and CapEx draws work in value add real estate projects
• Prepayment penalties including step down structures and yield maintenance
• The concept of defeasance and when it appears in commercial lending
• Lockout periods and why some loans prevent early payoff
• Assumable loans and how they can create opportunities in high interest rate environments
• Full recourse versus non recourse loans and what lenders can pursue if a deal fails
• Reserve requirements including operating reserves and replacement reserves
• Deposit requirements and liquidity expectations from lenders
• Interest rate floors and why rates may not drop below a certain level
• Bridge loan extensions and how investors manage refinancing timing

Quotes

• “Sometimes the most expensive part of a loan is not the interest rate. It is the terms hidden in the fine print.”
• “Every investor focuses on the rate, but the structure of the loan is often what determines whether the deal actually works.”

🎧 Connect with Jason:

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🎧 Connect with Frank:

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