A supplemental loan (or “second loan”) is used utilized to reward our passive investors with a portion of their original investment without refinancing into a new loan or selling the property. For example, once renovations are complete and higher rents are secured, our value add strategy comes to fruition. With a variable rate loan, we may go to the bank for a higher property value to be assessed and refinance. However, if we have a fixed rate loan, we may obtain a supplemental loan so we can then pull equity out of the property and increase cash on returns for our passive investors.