Mid-Renovation and Need Money
Member since 2024 · 46 posts · 28 votes
Mid-Renovation and Need Money
Most Popular Reply
Investor · Pacific Northwest · Member since 2026 · 538 posts · 312 votes
7moYou may already be thinking about it this way, but the real decision here probably isn’t which loan product to use — it’s whether finishing the project actually improves your risk position.
Based on your numbers:
ARV ~375k
Current debt ~140k
Remaining work ~150k
That puts you around 290k all-in if everything goes according to plan.
That’s still a reasonable margin on paper, but the bigger risk in situations like this is that unfinished projects tend to expand in scope once a new GC takes over. The contractor has to correct unknown issues from prior work, which can turn a $150k finish budget into something larger.
Before committing to new financing, I’d probably want to understand three things:
- What the property would realistically sell for today as-is to another investor.
- Whether the $150k scope has been fully re-bid by a GC who is responsible for the entire finish.
- Whether your timeline to stabilization (and tenants paying that $5k/month) is actually predictable.
Sometimes the lowest-risk move in a stalled renovation isn’t finishing it — it’s resetting the project structure so you know exactly what the remaining scope and timeline are.
If the ARV and rent assumptions hold, the deal still works. The key is making sure the remaining $150k is the last major capital decision, not the first of several more.
22 Replies
- 7moJason WrayPro MemberBanker · Nationwide · Member since 2020 · 2k+ posts · 1k+ votes
John,
I feel your pain and if the ARV checks out I would avoid DSCR and just do a Renovation loan based on the LTC. The tough part is No bank or lender really wants to pick up where a GC or "Bad builder" left off especially if they cut corners or did not properly pull permits. If that all checks out you just need to income qualify.
If not or cannot show income then I would suggest hard money HML which I typically never suggest but as a last resort. There are HML's that offer 90% and in some cases 100% LTC but expect to get hit with high rate and fee's (points).
You typically can do a refinance after 6 months of title seasoning (owning) and get a decent rate (DSCR "Rate and Term") (No cash out) Cash out may be an option in the end after 6-12 months or when complete but COR come with a higher rate due to LLPA (Loan Level Pricing Adjustments) basically cash out rate always higher than simple (rate and term only) refinance.
If you have any questions feel free to send me an email or reach out I do not mind offering advice on how to circumnavigate....
- Member since 2024 · 46 posts · 28 votes7moI'm curious why you would not recommend a DSCR loan for the renovations? A renovation loan does seem slightly better due to it not having early repayment fees, but if I do not qualify for a renovation loan I was likely going to do a DSCR loan.
Quote from @Jason Wray:
John,
I feel your pain and if the ARV checks out I would avoid DSCR and just do a Renovation loan based on the LTC. The tough part is No bank or lender really wants to pick up where a GC or "Bad builder" left off especially if they cut corners or did not properly pull permits. If that all checks out you just need to income qualify.
If not or cannot show income then I would suggest hard money HML which I typically never suggest but as a last resort. There are HML's that offer 90% and in some cases 100% LTC but expect to get hit with high rate and fee's (points).
You typically can do a refinance after 6 months of title seasoning (owning) and get a decent rate (DSCR "Rate and Term") (No cash out) Cash out may be an option in the end after 6-12 months or when complete but COR come with a higher rate due to LLPA (Loan Level Pricing Adjustments) basically cash out rate always higher than simple (rate and term only) refinance.
If you have any questions feel free to send me an email or reach out I do not mind offering advice on how to circumnavigate....
- Rental Property Investor · Southfield, MI · Member since 2010 · 111 posts · 20 votes7mo
Quote from @John Friendas:
What would you do in my situation?
I am mid-renovation, the home is partially gutted and I plan to have a general contractor take over and finish the project. It has been undergoing renovations for over a year and I learned that I am not a good general contractor. My thought was to take out a renovation-type loan (homestlye, dscr) and to get the project completed.
Rough numbers:
Renovation amount needed: 150k
Current mortgage: 140k
ARV: 375k
Expected total monthly rents: $5,000
I have had a string of bad subcontractors. I would really be relying on this new general contractor to be a good one.
I am in a similar situation. Will be good learn about the options…
- Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes7mo
Hey There @John Friendas - Recognizing that you need help is such an important quality. Something I am always working on myself, too.
So sorry to hear you are in a challenging situation, but rest assured, you are not alone. We are a General Contractor here in Chicago, and we probably have a consultation about every 2-3 weeks where they worked on a renovation loan, took a low bid, and then the contractor ended up walking off
How did you come up with the $150k to complete the renovation? Did you pull permits? What amount of scope is remaining?
What would the property sell for as-is if you didn't do anything else? And where would you be at with your profit and loss?I've learned the hard way too many times that it's often better rip off the bandid then bleed out.
Quality Builders4.967 Reviews- Member since 2024 · 46 posts · 28 votes7mo
Quote from @Jonathan Klemm:
Hey There @John Friendas - Recognizing that you need help is such an important quality. Something I am always working on myself, too.
So sorry to hear you are in a challenging situation, but rest assured, you are not alone. We are a General Contractor here in Chicago, and we probably have a consultation about every 2-3 weeks where they worked on a renovation loan, took a low bid, and then the contractor ended up walking off
How did you come up with the $150k to complete the renovation? Did you pull permits? What amount of scope is remaining?
What would the property sell for as-is if you didn't do anything else? And where would you be at with your profit and loss?I've learned the hard way too many times that it's often better rip off the bandid then bleed out.
Hi Johnathan,
Thanks for your reply, here is an answer to the two questions:
Would it sell?: No, only 1 of the units is not gutted/partially gutted.
How I came up with roughly $150k. There is still about $45k in electric/hvac that I am just going to pay with cash with my two good contractors. Permits were pulled, zoning can be weird as it is grandfathered in but the city has approved work so far.:
Plumbing including fixtures ($22.5k)
Drywall ($20k)
30 Windows, have 10 bought already ($10k)
3 kitchens (cabinets bought already) ($40k)
3 bathrooms ($30k)
Flooring (bought already for 2 units) ($15k)
Gutters/Fascia/Cleaning siding ($4k)
Exterior Doors: ($3.5k)
- Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes7mo
Hey @John Friendas - I was asking what it would sell for as is to another investor? Because no matter what, it would sell for the right price. To be clear, I'm not suggesting you stop and sell just trying to understand what that option would look like if you did.
Do you have any potential partners that you could bring in on the deal?
The property is a 3 unit building and how many square feet is each unit?
So you have two solid contractors in HVAC and Electric, that means you need to still find a licensed plumber and a finish contractor? Have you asked your two good subs if they have any ideas on other quality subs?
Quality Builders4.967 Reviews - Investor · Pacific Northwest · Member since 2026 · 538 posts · 312 votes7mo
You may already be thinking about it this way, but the real decision here probably isn’t which loan product to use — it’s whether finishing the project actually improves your risk position.
Based on your numbers:
ARV ~375k
Current debt ~140k
Remaining work ~150k
That puts you around 290k all-in if everything goes according to plan.
That’s still a reasonable margin on paper, but the bigger risk in situations like this is that unfinished projects tend to expand in scope once a new GC takes over. The contractor has to correct unknown issues from prior work, which can turn a $150k finish budget into something larger.
Before committing to new financing, I’d probably want to understand three things:
- What the property would realistically sell for today as-is to another investor.
- Whether the $150k scope has been fully re-bid by a GC who is responsible for the entire finish.
- Whether your timeline to stabilization (and tenants paying that $5k/month) is actually predictable.
Sometimes the lowest-risk move in a stalled renovation isn’t finishing it — it’s resetting the project structure so you know exactly what the remaining scope and timeline are.
If the ARV and rent assumptions hold, the deal still works. The key is making sure the remaining $150k is the last major capital decision, not the first of several more.
- Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes7mo
Hey @Michael Eskenasy - I really LOVE the way you put that - "Risk Position" - that's such a good way of framing the situation.
Also, I totally 100% agree that unfinished projects tend to expand in scope almost 99 times of 100.
Really great post reply and great questions for @John Friendas!
Quality Builders4.967 Reviews- Investor · Pacific Northwest · Member since 2026 · 538 posts · 312 votes7mo
Jonathan, I appreciate that.
The “risk position” idea actually started clicking for me after watching a lot of projects go sideways for the same reason: people underestimate how unfinished work changes the risk profile of a deal.
Once a property is partially torn apart, it’s no longer just real estate. It becomes a project with a clock on it.
At that point a few things change:
• Holding costs start compounding
• Scope creep becomes more likely
• Contractor coordination becomes the real constraint
• Financing options usually shrink instead of expand
So two properties that look identical on paper can have completely different risk depending on what stage the project is in.
A clean property with known problems is usually far safer than a half-finished property with unknown ones.
That’s why I tend to think about these situations less as “real estate risk” and more as project management risk.
Curious if you see the same pattern in Chicago — especially with properties that get halfway through a renovation before a new investor steps in.
- 7moBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @Michael Eskenasy:
Jonathan, I appreciate that.
The “risk position” idea actually started clicking for me after watching a lot of projects go sideways for the same reason: people underestimate how unfinished work changes the risk profile of a deal.
Once a property is partially torn apart, it’s no longer just real estate. It becomes a project with a clock on it.
At that point a few things change:
• Holding costs start compounding
• Scope creep becomes more likely
• Contractor coordination becomes the real constraint
• Financing options usually shrink instead of expand
So two properties that look identical on paper can have completely different risk depending on what stage the project is in.
A clean property with known problems is usually far safer than a half-finished property with unknown ones.
That’s why I tend to think about these situations less as “real estate risk” and more as project management risk.
Curious if you see the same pattern in Chicago — especially with properties that get halfway through a renovation before a new investor steps in.
@Michael Eskenasy has this right...you must be certain that your numbers are rock-solid and that there will be no or minimal change orders once you start up with your new GC.
When you hire a new GC to take over an ongoing project, they are going to be (rightfully) concerned about incurring liability from the work that has already been completed. What if there are faulty or non code compliant issues behind a wall that goes unnoticed by the new GC? If a fire starts a year down the road, both he and you will be held liable.
Having said that, I strongly believe that your $150k budget to finish will be low. As a matter of fact, I would just plan on that being $200k. I'd bet you money on that....ask me how I know, Lol....
So -1) Re-evaluate your numbers, create a new spreadsheet and start fresh with a completely clean slate, just pretend that you are walking into a brand new project.
2) Find a really awesome General Contractor, do not go cheap on this. You need an older, veteran GC, the kind that can 'see through walls' Lol.....
3) Get a solid, written bid/proposal and sign a binding - legal in your state - contract. Get everything written down, Everything. Pictures of tile, SKU numbers of products. Everything.
Good luck and get in touch if you have a question...
- Investor · Pacific Northwest · Member since 2026 · 538 posts · 312 votes7mo
That’s a great point about the liability side when a new GC steps into a half-finished project. That concern alone changes the dynamic because the contractor isn’t just pricing the remaining work — they’re pricing the unknowns behind the existing work.
And those unknowns tend to show up in a few predictable places: electrical, plumbing tie-ins, and anything that was opened and closed without proper documentation.
What I’ve noticed is that once a project crosses that halfway point, the risk profile starts behaving less like construction and more like forensics. The new GC is effectively trying to reverse-engineer decisions that were made earlier without full visibility.
That’s why your suggestion to rebuild the numbers from a clean slate is usually the right move. When someone takes over a project mid-stream, they’re not really finishing someone else’s plan — they’re often starting a new project inside an existing structure.
The interesting part to me is how often these situations trace back to the same upstream issue: the original project wasn’t fully pressure-tested during the pre-con phase, so the problems only surface once walls start opening.
I’ve been looking at that “upstream risk” layer quite a bit lately because it shows up across markets in very similar ways.
Out of curiosity — in Chicago, when you see projects get stuck halfway through, is it usually scope drift, budget underestimation, or permit/inspection issues that trigger the stall?
- Member since 2026 · 21 posts · 6 votes6mo
Quote from @Michael Eskenasy:
That’s a great point about the liability side when a new GC steps into a half-finished project. That concern alone changes the dynamic because the contractor isn’t just pricing the remaining work — they’re pricing the unknowns behind the existing work.
And those unknowns tend to show up in a few predictable places: electrical, plumbing tie-ins, and anything that was opened and closed without proper documentation.
What I’ve noticed is that once a project crosses that halfway point, the risk profile starts behaving less like construction and more like forensics. The new GC is effectively trying to reverse-engineer decisions that were made earlier without full visibility.
That’s why your suggestion to rebuild the numbers from a clean slate is usually the right move. When someone takes over a project mid-stream, they’re not really finishing someone else’s plan — they’re often starting a new project inside an existing structure.
The interesting part to me is how often these situations trace back to the same upstream issue: the original project wasn’t fully pressure-tested during the pre-con phase, so the problems only surface once walls start opening.
I’ve been looking at that “upstream risk” layer quite a bit lately because it shows up across markets in very similar ways.
Out of curiosity — in Chicago, when you see projects get stuck halfway through, is it usually scope drift, budget underestimation, or permit/inspection issues that trigger the stall?
The pre-con phase being where most projects are actually won or lost makes a lot of sense. By the time construction starts, the decisions are already baked in. What does structuring that phase more deliberately even look like in practice?
- Investor · Pacific Northwest · Member since 2026 · 538 posts · 312 votes6mo
Structuring pre-con deliberately means you stop treating it like planning and start treating it like risk elimination.
In practice, it comes down to three layers:
- System mapping before scope is locked
Every major system gets traced end-to-end — not just what’s being built, but how it connects, what it depends on, and where assumptions are being made. Anything that can’t be verified is flagged as a risk, not buried. - Decision logging with context
Not just what was decided, but why.
What options were considered, what was rejected, and what assumptions each decision relies on. That way, when something breaks, you’re not guessing — you can trace it back to the exact moment it was introduced. - Forward stress-testing
You run the project as if it’s already under construction and look for failure points:
Where does rework show up?
What would a new GC immediately question?
What requires perfect execution to not fail?
Most projects skip this and rely on “it should work.”
That’s where things go sideways.
With ChefreyOS, that entire layer becomes structured instead of manual.
As conversations, plans, and decisions happen, the system captures them with context — who said what, why it mattered, and what it impacts downstream. Instead of scattered notes and assumptions living in people’s heads, you get a live, traceable record of the project’s logic.
That allows you to:
- Reconstruct any decision instantly
- See dependencies across systems before they break
- Identify unverified assumptions early
- Run stress-tests against actual project context, not hypotheticals
So pre-con stops being a static phase and becomes a continuously validated model of the build.
By the time construction starts, you’re not hoping it works.
You already know where it breaks — and you’ve addressed it.
- System mapping before scope is locked
- Investor · Austin, TX · Member since 2021 · 497 posts · 127 votes7mo
Sounds like the main issue isn’t the deal anymore but it is getting the project across the finish line.
Based on your numbers, the equity still seems solid (around $375K ARV vs ~$290K total after the remaining reno), so finishing the project likely makes sense if the $150K estimate is realistic.
At this stage I’d focus less on the financing structure and more on locking down the right GC with a clear scope of work and milestone payments. A bad contractor can easily turn $150K into $200K+ if things aren’t tightly managed.
For funding, a renovation or short-term loan can work if the property’s current condition makes refinancing difficult right now. Many investors do that to finish construction and then refinance into a long-term loan once the property is stabilized and rented.
Just to understand, the $5K expected rent coming from one unit or multiple units? That will make a big difference when it comes time to refinance.
- Financial Advisor · FL · Member since 2024 · 467 posts · 114 votes7mo
You’re actually not in a terrible spot on paper.
140k current debt plus 150k to finish puts you around 290k all in. If the ARV is really 375k, the deal still works. The real risk here isn't the loan product, it's the project continuing to drag.
When a new GC steps into a half finished job, costs almost always move. Something gets redone, something gets discovered behind the walls, timelines stretch. So the most important thing right now is locking a GC into a very clear scope and fixed numbers before taking on new debt.
Financing wise, most traditional lenders hate stepping into mid renovation projects. That’s why a lot of investors use short term construction or bridge money to finish, then refinance once the property is stabilized and rented.
Your numbers suggest the equity is there. The key question is whether that 150k is truly the finish line or just the next checkpoint.
Curious what the property would realistically sell for today to another investor as is.
Stevan
- Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes7mo
@Michael Eskenasy - We see this every week in Chicago. I've experienced project stalls myself and it's one of the most painful thing investors can go through. It's so much better to pay more to someone who can get the job done than beat contractors down on price and then be upset later when things don't go right.
Being a general contractor that focuses on homestyle and FHA 203k it's a regular thing to see clients get poorly written BORs with bad numbers and then get even lower number from a contractor.
The contractor starts with the easy part, like demo, and then walks away, leaving the borrower in a sad, sorry position. We've taken over numerous projects in those situations. We honestly try to stay away from the takeover because it almost ALWAYS still costs more than we expected. Plus, building that forward project momentum that was lost completely is very hard to do again.
Quality Builders4.967 Reviews- Investor · Pacific Northwest · Member since 2026 · 538 posts · 312 votes7mo
@Jonathan Klemm — that’s exactly the failure mode I was thinking about.
Once the forward momentum of a project breaks, it’s incredibly difficult to recover because the entire system around it starts slipping — lenders, inspections, subs, timelines, everything.
What I’ve noticed is that the stall usually isn’t actually caused by the contractor walking away. That’s just the symptom.
The root problem is usually upstream: poorly structured scopes, bad numbers, and no real process for stress-testing the project before work starts.
By the time demo begins, the project has already been set up to fail.
I’ve become increasingly convinced that a lot of rehab risk isn’t construction risk — it’s decision process risk earlier in the pipeline.
Curious how often you see that when you step into takeover projects.
- 7moEthan HaiglerBusiness MemberReal Estate Agent · Charlotte, NC · Member since 2019 · 111 posts · 58 votes
@John Friendas - you could try capital stacking. I used this to fund my rehabs. DM me and I can help
There is a major line item missing - your holding and carrying costs. You will not be $290K all in. If you are a year in now and at the stage you're at, you are at least another 6 months from finishing if not longer. If you include your carrying costs up to this point plus another 6-12 months before you have full tenancy plus your refinance costs plus guaranteed contractor overages you will be adding many tens of thousands. Unless you are paying carrying costs out of pocket and leaving the cash in the deal, you will easily be above 80% LTV and have a hard time refinancing.
I was exactly in this situation when I was about 10 months into my last project and I hired a GC to finish the project which ended up being a total disaster.
I ended up continuing as GC and was able to stay on budget and a reasonable timeline for the scope of the project from that point on, however, it was the carrying costs that absolutely killed me. Taking that amount of time for the project took it from a home run to not worth doing. I'm glad I saw it over the finish line but the right option would have been to sell midway through.
Hey @John Friendas,
It sounds like you’re in a tough spot, but from a lender’s perspective, you're actually in a fairly manageable position—your equity and ARV give you room to work with. The real challenge here isn't the loan product itself; it's the project risk of taking over a partially finished renovation.A few key considerations from where I sit as a lender:
1. Confirm the remaining scope and contractor plan
Before putting new financing in place, make sure your GC is responsible for the entire remaining scope, has verified the numbers, and can commit to a timeline. This protects both you and the lender from surprises that drive costs higher.2. Financing options
-
Renovation loans (Homestyle or conventional construction/renovation products) can work if the scope, permits, and contractor bids are clear. They often allow you to wrap remaining rehab costs into the loan.
-
DSCR or cash-flow-based loans are usually less optimal at this stage if you’re planning a short-term hold, but could be used once the property stabilizes.
-
Hard money loans can step in if documentation or income is tricky, but rates and points are higher. Many investors use HML as a bridge to get the renovation done, then refinance into conventional financing once stabilized.
3. Project risk vs. loan risk
Lenders will focus heavily on:-
The completeness and realism of your remaining rehab budget
-
Permits and code compliance
-
The experience and accountability of your new GC
Even with sufficient equity, a lender may hesitate if the project is open-ended or if past work creates uncertainty. That’s why many investors treat this like a short-term construction/bridge scenario, finish the rehab, and refinance into a lower-rate product once stabilized.
4. Your “risk position”
As @Michael Eskenasy and @Jonathan Klemm mentioned, it’s crucial to know your as-is options. What would the property sell for today? Could you walk away if needed? Having that benchmark helps you make informed decisions on funding the completion versus cutting your losses.On paper, your numbers work: $140k existing debt + $150k rehab = $290k all-in vs ARV $375k, leaving a solid margin. The key is ensuring that $150k truly completes the project, and isn’t just the next checkpoint in a chain of overruns.
It can be helpful to review different financing strategies that other investors in similar situations have used—such as combining renovation-focused loans with short-term bridge financing—to ensure projects get completed efficiently and risks are minimized. Best of Luck!-
- Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes7mo
Wow @Michael Eskenasy I think you hit the nail on the head. By far the largest problem is rushed projects with a lack of proper planning. It's also often been a client's first project and often a rather large one.
Any project with a renovation loan that requires a budget before closing and almost 9 times out of 10 that means before FULL APPROVED plans by the city of Chicago are released.
Then, on top of that, they are rushing and don't have a clear scope or want to make major scope changes mid-project. Also, most of those clients lack the ability to take ownership of their part in the delays and changes.
Early on we would be rushed and make mistakes, now if we aren't aligned properly with the clients we are able to to say no which becomes a super power. Very easy to say but hard to do when you are starting a business and naturally worried about keeping it going.
The amount of time it takes to properly plan and go through the pre-con process can take weeks or even months...when that isnt taken on larger projects bad things can happen.
Quality Builders4.967 Reviews- Investor · Pacific Northwest · Member since 2026 · 538 posts · 312 votes7mo
That lines up with what we’ve seen as well.
Most people think the risk in a project lives in the construction phase, but in reality a lot of it is already baked in before the first permit is pulled. Once the project starts moving, you’re mostly just watching earlier decisions play out.
The pattern you’re describing — rushed budgets, incomplete plans, mid-project scope changes — usually traces back to the same upstream issue: the decision pipeline wasn’t fully structured before capital and contractors were engaged.
By the time a GC gets involved, a lot of those assumptions are already locked in.
One thing I’ve found interesting is that the groups who consistently avoid those stalls tend to treat the pre-con phase almost like underwriting — they spend disproportionate time pressure-testing scope, sequencing, and execution risk before anything breaks ground.
It’s slower upfront, but it compresses a huge amount of downstream chaos.
Your point about learning to say no is also underrated. A lot of operators only discover that “superpower” after a few painful projects.
I’ve been spending a lot of time lately looking at how that upstream decision layer can be structured more deliberately across projects and markets. If you ever want to compare notes on that side of things, feel free to reach out — it’s a fascinating part of the pipeline that most people don’t spend enough time on.
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