How Do Interest Reserves Work? Maximize Your Leverage & Keep More Cash in Your Pocket

When it comes to real estate investment and getting a property ready for sale, there’s a lot of factors that investors must consider. From acquisition and renovation to total loan costs, investors are constantly balancing multiple financial variables; many of which can lead to unexpected out-of-pocket costs.

For borrowers who are a part of our ABL+ program, it’s important to remember that you can further structure your loan payments by taking advantage of interest reserves. Despite often being misunderstood by new and experienced investors alike, interest reserves can actually help maximize your leverage.

What is an Interest Reserve?

An interest reserve is a part of a loan that is set aside to cover the monthly interest payments during an investment project, so the borrower does not have to pay out of pocket while they are renovating or stabilizing a property.

While many real estate investors focus on purchase price, renovation budget, and projected resale value, they can often overlook their cash flow during the scope of the project. Interest reserves are designed to allow your monthly loan payments to be built directly into the loan structure, eliminating the need for out-of-pocket payments during the course of your project. Instead of allocating capital toward monthly interest, your cash remains available, giving you greater flexibility and control while you execute.

How do Interest Reserves Work at Asset Based Lending?

Asset Based Lending offers interest reserves through our ABL+ program, designed exclusively for our most experienced borrowers. If you’ve completed five or more loans, you automatically qualify at your sixth loan—no additional steps required. This ensures that our most active investors have access to the tools they need to continue scaling efficiently.

Investment projects can already cost up to millions of dollars on their own. But in addition, monthly interest payments can include thousands of dollars that the investor is also responsible for. A lot of investors either cannot or do not want to have to keep these additional payments in mind, especially during the renovation process.

By planning ahead and including your interest payments as a part of your base loan, you can ultimately lower your closing costs, limit out of pocket payments during your project development, and scale your success with each project.

Take Advantage of Interest Reserves with Asset Based Lending

If you’ve completed five or more loans, you’re already qualified for ABL+. You’ll automatically be able take advantage of interest reserves on your next deal. And we’re ready to partner with you to get your next loan on the table. As an experienced investor, you know ABL is ready to provide fast, flexible funding to help you succeed and grow.

And keep in mind that you automatically qualify for ABL+ after 5 loans. It’s not an additional program that you have to enroll in. So, if this is your first time qualifying, you’ll still have access to interest reserves on your next loan.

Ready to get the ball rolling on your next investment project? Pre-qualify now to get started today!