Two years ago, you bought a rental property using a short-term loan, planning to refinance before it matured. At the time, this was a common strategy — property values were climbing, and banks were eager to lend. But now, with the loan coming due, the property is worth less than you expected, and your bank won’t refinance. This scenario is becoming more common, forcing property owners to seek alternatives as traditional financing dries up.
Private lenders are now fielding more calls from owners in this position. Jack Miller, President and CEO of Gelt Financial, a private lender in the Philadelphia area, says his firm is seeing a notable increase in borrowers who can’t refinance with a bank. Gelt specializes in small commercial bridge loans, averaging about $365,000, typically with two- to three-year terms. Over the past year, Miller has seen a clear rise in owners seeking quick solutions as their original plans fall apart.
The core issue is mismatched timing. Many investors used short-term, high-leverage loans to buy properties at peak prices, assuming they could refinance or sell at a profit before their loans matured. But as the market cooled, property values stalled or declined, and refinancing became much harder.
Miller explains that borrowers often intended to hold properties long-term but financed them with short-term debt, putting themselves at risk if the market didn’t cooperate. When values didn’t rise as expected, owners ended up with loans coming due and properties worth less than their debt. Banks are unwilling to refinance underwater loans, and selling would mean taking a loss. By the time these borrowers approach private lenders like Gelt, they are often facing foreclosure or a tight deadline after being turned down by their bank.
Multifamily properties are seeing the most distress, especially those purchased at inflated prices in recent years. Owners of single-family rentals, small commercial buildings, and mixed-use properties are also getting caught. The common thread is owners who bought at the market’s peak, used short-term loans, and expected to refinance before maturity. When values stagnated or dropped, their exit strategy failed.
Private lenders such as Gelt can move quickly — often approving loans within minutes and closing in as little as three to five days. This speed is crucial for borrowers facing imminent deadlines or foreclosure. Some deals involve borrowers who could qualify for a bank loan but can’t wait for the lengthy bank approval process. These owners use a private loan as a temporary bridge, then refinance with a bank a few months later.
However, private lending has limits. Gelt does not fund construction loans, land purchases, or speculative development projects. High leverage is a deal-breaker; if the loan amount is too close to the property’s current value, the risk is too high. The firm also focuses on properties in urban and suburban markets with stable or growing populations. Miller says demographic trends are a key factor: “Ideally, you’re looking for rising demographics.”
Owners in trouble often wait until the last minute to seek help. Miller says many borrowers hope the problem will resolve itself and only reach out when foreclosure is imminent or time has nearly run out. By then, their options are limited, and the terms they can secure are less favorable.
If your loan is coming due and refinancing with a bank isn’t possible, it’s crucial to contact a private lender as soon as you know there’s a problem. Acting early gives you more choices and a better chance at a workable solution.
If your property is worth less than your loan balance, assess your situation honestly. Private lenders can help if you have some equity. Still, if you’re deeply underwater, you may need to bring cash to the table or negotiate directly with your current lender for a workout or modification.
For owners with equity who need a fast solution, a private loan can buy time to arrange a longer-term refinance with a bank. Private loans carry higher interest rates and fees, but they are designed as short-term fixes, not permanent financing.
If foreclosure is looming, do not delay. Contact your lender immediately and explore all available options. Ignoring the issue will limit your options and increase the risk of losing the property.
Property owners who bought at market highs using short-term financing are now facing a tougher environment. Stagnant or falling values and tighter bank lending standards have left many unable to refinance as planned. Private lenders are seeing more distressed borrowers than they have in years, and those who wait until deadlines are near have the fewest options. The most important step is to act early – the sooner you address the problem, the more likely you are to find a workable solution.
About the Expert: Jack Miller is President and CEO of Gelt Financial, LLC, a private lender based in the Philadelphia area. Since 1989, Gelt has focused on bridge loans, non-performing-loan purchases, and joint-venture equity for small commercial and business-purpose properties.
This article is based on information provided by the expert source cited above. It is intended for general informational purposes only and does not constitute legal, financial, or real estate advice. Readers should conduct their own research and consult qualified professionals before making any real estate or financial decisions.
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