When to Use Private Capital Before Bank Financing

Private capital is often best used to execute the transition—then replaced by lower-cost permanent debt once the asset becomes bankable.

Private Capital as a Transition Tool

Private capital is not always the cheapest capital. It is often the most useful capital during acquisition, repositioning, or time-sensitive transitions where banks cannot move quickly or will not fund the asset as-is.

A Common Capital Sequence

  1. Acquire: private money or bridge capital closes quickly.
  2. Stabilize: improve occupancy, operations, or condition.
  3. Refinance: transition to DSCR or bank financing once stabilized.

When This Strategy Works Well

  • Transitional assets with a clear stabilization plan
  • Acquisitions with tight timelines
  • Value-add opportunities where permanent debt is not immediately available

What Can Break the Strategy

  • Underestimating time and cost to stabilize
  • Overleveraging at acquisition
  • Assuming refinancing will be automatic

Quiet conclusion: Private capital should be used with intention—then replaced with permanent debt once the asset earns it.

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