A good deal can still create a situation with a stalled real estate project. Here’s how to save it.
One of our favorite loans is the type that fixes a stalled project.
Stalled real estate projects most often happen when:
- You run out of money before you run out of work to do, so the house can’t get on the market.
- A refinance on a flip doesn’t work out, but the original high-interest loan designed for the short-term loan is racking up payments.
This situation accumulates interest, taxes, and other carry costs that you were not anticipating.
We love saving these stalled real estate projects. We don’t care if our loan is in second, third, or fourth position, as long as we see the deal coming through.
Let’s go through a couple examples of times we’ve recently helped clients with stalled real estate projects.
Funding the Escrow on a Stalled Real Estate Project
For this client, we funded him money in escrow to fix up a property.
He had another lender first. It was a big, national fix-and-flip lender who had a lot of money sitting in escrow for him. But, they wouldn’t release any money until he got his other properties finished first.
This client had a lot of other properties going at once, so he didn’t have the cash flow to fund this one. He also didn’t want to sit on his new property, waiting until his lender decided to give him his cash.
After four months of fighting, he decided to get a loan through us instead. We were able to fund the whole thing. We used a lien on another property of his properties to fund the whole escrow.
Now, he’s able to get this property done and on the market in time for spring. Once he sells, the other lender will release his funds, and he’ll be able to pay us back.
Funding an Over-Budget Fix and Flip
One of the most common stalled real estate projects we see: a fix-and-flipper runs out of money.
- The budget was too low to begin with
- The flipper got priced out of material and labor costs.
- An expensive surprise was found in the house that wasn’t accounted for in the original budget.
We had a client come to us recently in this exact scenario. He knew he needed an extra $20,000 to $25,000. He wasn’t completely sure which.
He’s hoping it’s only $20k, but we gave him a loan for $25k anyway. This allows him to:
- Not piecemeal a budget (getting a couple thousand funded here, a couple thousand there, etc).
- Finish the project faster.
Now, he won’t miss the springtime market.
Why We Do Loans on Stalled Real Estate Projects
We’re glad to help real estate investors when money for projects falls just a bit short.
Anytime you have a good project or a good loan-to-value, us lending to you makes a win-win for everyone.