Help! What if I can't sell my flip during the virus?
I am looking for insight into exit strategies on a single family 3/2 flipped house in Portland 21 days on the market. The pre Covid-19 ARV was projected to be ~400K. The property has a hard money loan of $235K at 10.5% interest only. There are some expensive hard money extension options (1-2 points and similar interest rates for 6-12 months) right around the corner as the term expires end of May 2020.
There are 4 investors that make up roughly equal shares of an additional $105K of bridge money invested. The deal is structured as a profit participation agreement with shared percentage of profit or loss.
I am of the mind that the corona virus is already on its way towards causing a massive economic downturn that will hit the local real estate market quite hard. Therefore, selling ASAP and attempting to break even/preserving capital if possible to be able to take advantage of that coming opportunity is a priority. However, that may not come, which likely means holding long term.
I see a couple options:
1) Price drop it beyond the low end of ARV range so it is the best deal by a good margin locally. Do it right now all at once and do our best to break even with a quicker sale. Pros: Better chance to sell ahead of a market that may turn sharply or freeze. Cons: It's a panic sell, it will show desperation and our cards are already played so we won't have any room in a negotiation. Also, if nobody is able/willing to view it due to the corona virus, price won't drive a quick sale right now anyways. Even if under contract a buyer may back out or renegotiate if it really hits the fan in the next month or two.
2) The other idea is to get creative hold strategy as a rental or lease option to allow us to break even while holding it. Pros: When this blows over or we can make it through a prolonged down cycle, the market will eventually recover to sell. Cons: It may very well not cashflow as a rental and be a long slow cash drain and lost opportunity cost. Also, the group isn't legally structured well for a long hold term as is.
Obviously, refinancing out of the interest only hard money loan is primary. I don't know what is possible regarding a refinance. A commercial loan product available to an LLC or joint venture? Would it need to be a personal loan with only one individual on title, multiple people on title? If so, would the investor need to buyout or write up a new legal structure involving all parties?
#'s recap:
235K hard money 10.5% rate expiring 5-30-20 with a point every 6 months thereafter.
105K additional bridge money invested between 4 investors.
Break even price ballpark is 35k less than currently listed price of 400K, giving us room to drop.I appreciate any feedback or suggestions! This is my first flip, so... yeah :)