I have done multiple development projects with clients and have worked with banks on financing them. I am just alittle confused on how exactly the loans are profitable. For example, most construction loans are interest only and the loan includes about like 2-3 years worth of interest reserve. So if a borrower builds a project and uses the interest reserve to pay the interest each money, they are just paying back the bank their initially money. Heck, when the project is stabilized, they just refinance the loan with a perm lender and there was still some interest reserve left. So I don't fully comprehend how construction financing can make money? This scenario has happened countless times.
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