Here's how the private lender now gets paid off (again, just a high level overview):- At some point, the lender will be requested to fill out a "Demand" where they list how much they are still owed in terms of outstanding principal balance and any remaining accrued/unpaid interest that is due. 

But those are the only 2 viable option I see for accessing the equity I have accrued.

I would take $X per year to set aside over the next 10 years to make sure there were required funds to pay the 3 years of debt payments during the rent holiday -- and would even put that $ in the lending bank's checking account so they had proof that money was being accrued."

IE what happens if there is not enough money at close to pay his capital back and your 10% has been wiped out.. also is there monthy payments on the 1% or is it accrued.

The more equity that you accrue through appreciation and making your monthly payments, the amount of cash that you have in the deal continues to go up.

If it’s set up from day 1, it simply becomes your reserve fund that continuously accrues as you pay down your mortgage.

The seller could always explore an offer from them before electing to list on the MLS and begin accruing days on market. 

I will charge you secret fees for 'managing' your money, deflating your 'guaranteed' rate to an absolutely laughable, dismal real rate.Oh- and when you die, I will keep all accrued 'cash value'.  

The truth is that interest accrued on a HELOC is no different than interest accrued on a standard mortgage.

Here are the numbers on that:Rent: $1875PITI: $1467Cashflow: $408 (I don't touch this money, I just let it accrue in an account to cover repairs, cap expenses, and tenant turnover)Last year the house appraised for $305,000 and we took out a $30K Equity Line of Credit (I'm actually kicking myself over this decision, since I should have had the PMI removed first!).