Unique finance issues with flipping

16 Replies

Happy Sunday All,

I will try to distill the mess I find myself in to just the pertinent facts:

I bought my first flip in January. It was suppose to take no more then 3 months, and 50k to repair. I am now at 6+ months and 75k to repair. In addition, the original CMA done put its value at 230k, where as now its at 210k. Purchased for 93k.

I'm now at the point probably most newbies get to where now I have no money, and the hard money used to finance is too expensive to keep carrying. Originally a concern was getting the equity back out at sale, however that is a distant hope at this point. I need to stop the bleeding. The problem I find myself in now is I switched jobs (was in the army for 9 years) and as of January I started working at a brokerage. So now I find myself unable to refinance with a va or conventional loan (they wont count the income as its less then 2 years). FHA will still be difficult if not possible as well.

Essentially the only way out it to get out from under it and fast, but its been on the market for 25 days (Nashville market) and there has been little to no interest.  My gut says drop the price to break even and try and sell it there (however there are other considerations as well), but I would be much better off BRRRRing it.  Except I dont see a way to make the Refinance portion of it work.

Any suggestions are welcome, and please PM me for more info if you need it.  Thanks everyone

@Christopher Labonte why would you leave a steady paying job for a commission only job when you know you may have had to refinance?

What’s your realtor say? What has the feedback been?

What’s the loan amount? Current interest rate?

Yeah, you’re going to have to lower the price....it doesn’t matter what your profit or loss is, if it’s not selling and there aren’t deficiencies you can fix, it’s simply priced to high.

@Wayne Brooks in reality I agree, Id like to just sell it at break even to move it fast.  The problem with that is I have a deal with the contractor doing the work (not please with him for a lot of reasons, but that's a story for another time).  Instead of paying his contractor fee we agreed to do a profit split.  Im not overly concerned about the reaction if there is no profit, that's his risk.  But if I can avoid that Id like to 

Originally posted by @Christopher Labonte :

@Caleb Heimsoth I left the military for a lot of reasons.  I purchased the flip 6 months after having left the military, so it wasn't really a consideration at the time.  Loan amount is around 143k @ 11.99%

If you haven’t gotten any offers you’ll probably have to drop Price.  Are you using an agent?

Originally posted by @Christopher Labonte :

@Benjamin Hurwitz Rehab is complete, been on the market 26 days.  11.99%

So if I have this right, you did not leave reserves to service the loan for a few months in case selling it took longer than expected.

Do you have any refi options to a lower interest rate that does not involve prepayment penalties?

@Benjamin Hurwitz I had 25k in reserves to service the loan, which ended up in the project. I have no refi options that Im aware of. My w2 income and rental property income cant be counted for another year, and the money I receive from the VA isn't enough to finance something that large

Christopher, don't think in terms of breaking even. The money you have into this project is a sunk cost. The house will sell for what a buyer thinks it's worth, not what will keep you from losing money. It's a hard pill to swallow, but you need to bite the bullet and get out of the deal as soon as possible.

It's hard to deal with in the moment, but most investors here have been in the same situation at one point or another. You live and learn, that's the game.

Sell the property using creative means such as offering partial owner financing to attract buyers. Even if you end up just breaking even or even losing a little bit, that's fine but get out of the deal. Don't let this situation turn into a giant alligator. 

Good luck.