Home Blog In May 2023, inflation increased by 4% year on year. This is the lowest rate in 2 years

In May 2023, inflation increased by 4% year on year. This is the lowest rate in 2 years

The CPI numbers are out. Here we go…

Headline CPI has decreased to 4%! From 4.9% last month. Not bad, eh? Energy/oil/gas prices are enormous and dropped 6% from last month. Huge help.

Core CPI has decreased to 5.3 vs. 5.5% from last month. This is what Fed looks like. Shelter costs have risen by 6%. Rents are still very high, and Core CPI is about 40% of rent. It’s our most significant household expense.

So what do you do? You invest in LBC Capital Income Fund, LLC, to preserve and multiply your wealth. Our target return is 8% and should be higher this year.

This offering is for accredited investors only. The minimum investment is 250,000

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Interest-Only Loans in Private Lending: How They Work and Why Lenders Use Them Most loans you've encountered in everyday finance — mortgages, car loans, student loans — are amortizing: each payment covers both interest and a portion of principal, so the balance gradually decreases over time. Private real estate loans work differently. The majority of bridge and short-term real estate loans are interest-only (IO), with principal repaid as a single balloon payment at maturity. This structure shapes everything about how private lending funds generate income for investors. What Is an Interest-Only Loan? In an interest-only loan, the borrower pays only the interest accrued each period — monthly, in most private lending arrangements — and the entire original principal is repaid at the end of the loan term. There is no gradual principal reduction. The balance on day one equals the balance on the day before maturity (assuming no partial prepayments). This design is deliberate: it keeps monthly payments low for the borrower and produces a consistent, predictable income stream for the lender and, by extension, for fund investors. A Concrete Example A borrower takes out an $800,000 bridge loan at 9.5% interest-only for 18 months on a multifamily renovation project in Dallas. Monthly interest payment: $800,000 × 9.5% ÷ 12 = $6,333. For 18 months, the borrower pays exactly $6,333 per month — never more, never less. At month 18, the borrower refinances into a conventional Fannie Mae loan after completing the renovation and reaching full occupancy. The refinance proceeds pay off the $800,000 balloon in full. Total interest paid over the term: $113,994. For the lender, this was a clean, predictable revenue stream. No tracking of amortization schedules. No fluctuating payment amounts. Just 18 identical monthly payments and a full principal return at the end. Why Private Lenders Prefer IO Structures The interest-only structure suits the short-term nature of private real estate loans for three reasons. First, it keeps borrower carrying costs low during the value-add phase, when properties are often partially vacant or under renovation and not yet generating full income. Second, it simplifies the exit: the borrower refinances out of the bridge loan for a fixed amount — the original loan balance — rather than a declining balance that must be tracked and calculated at payoff. Third, it aligns incentives: the lender's goal is a clean, full repayment at maturity. IO loans make that outcome simpler to model and execute. How IO Loans Affect Investor Returns From a fund investor's perspective, IO loans produce exactly the income pattern most accredited investors want: consistent monthly cash flow followed by full return of principal at loan maturity. When a bridge loan pays off, the fund receives the balloon principal and redeploys it into a new loan — often within 30–60 days. This capital recycling means the portfolio stays productive. A fund holding 15 IO loans with staggered maturities will see principal returned and redeployed continuously throughout the year, maintaining near-full investment of committed capital. The Risk of the Balloon Payment The IO structure's primary risk is the balloon: at maturity, the borrower must come up with the full loan balance in one payment. If the borrower's exit strategy fails — the refinance is delayed, the property sale falls through, market conditions change — the balloon cannot be paid. This is why private lenders spend as much time underwriting the exit strategy as they do the entry. A well-structured IO loan is only as sound as the borrower's realistic, documented path to repayment at maturity. Conservative lenders require evidence of refinance qualification (debt service projections, lender letters) or a signed purchase contract before advancing the loan. IO vs. Amortizing Loans for Short-Term Projects For a 12-month bridge loan, an amortizing structure doesn't make economic sense: a $1 million loan amortized over 25 years would reduce principal by only $18,000–$22,000 over 12 months — negligible equity build while complicating every payment and payoff calculation. IO is the logical structure for short-term real estate finance. Amortizing loans make sense for long-term holds (30-year residential mortgages, 25-year commercial loans) where principal reduction over time meaningfully reduces risk and builds equity. Different tools for different purposes. What Investors Should Ask About Loan Terms When evaluating a private lending fund, four questions about loan structure matter: (1) Are loans in the portfolio interest-only or amortizing? (2) What is the average term of loans, and what does the maturity ladder look like — are multiple loans maturing at the same time? (3) What is the fund's process for handling a balloon that cannot be paid — is there a defined extension, forbearance, or foreclosure protocol? (4) Does the fund maintain an interest reserve to cover payments if a borrower hits a short-term cash flow issue? LBC Capital's Loan Structuring Approach LBC Capital originates interest-only bridge loans secured by first-lien deeds of trust on California and Texas real estate. Monthly borrower interest payments flow directly to fund investors as monthly distributions. Visit lbccapital.com to learn more about loan portfolio composition and current offering terms. Meta Description: Interest-only loans in private lending explained: how IO loan structures work, why lenders use them, and how they create consistent monthly income for accredited investors in real estate debt funds. Target Keywords: interest-only private loans, IO loans real estate, interest only bridge loan, how interest only loans work, private lending loan structures, balloon payment private loan, bridge loan interest only. LBC Capital

October 25, 2026 by James D.

Investing Tips

Interest-Only Loans in Private Lending: How They Work and Why Lenders Use Them

Most loans people deal with day to day — a mortgage, a car loan, a student loan — are amortizing. Every payment chips away at both interest and principal, so the balance shrinks a little every month. Private real estate loans mostly don’t work that way. Most bridge and short-term loans are interest-only, with the […]

Real Estate Debt vs. the Stock Market: Why Income Stability Is Worth More Than It Looks

October 23, 2026 by James D.

Investing Tips

Real Estate Debt vs. the Stock Market: Why Income Stability Is Worth More Than It Looks

When stocks are up 20% for the year, a 9–10% fixed income return from private real estate debt looks almost boring by comparison. That comparison is also incomplete. It only looks at where each investment ends up, not the ride it took to get there — and for anyone actually living off their portfolio, the […]

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In May 2023, inflation increased by 4% year on year. This is the lowest rate in 2 years

Latest posts

Interest-Only Loans in Private Lending: How They Work and Why Lenders Use Them

Real Estate Debt vs. the Stock Market: Why Income Stability Is Worth More Than It Looks

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