We’re still relatively new to flipping—we’ve done two properties so far—but we’re running into some serious challenges with hard money.
The interest and fees are basically eating up our profit. Contractor delays alone have cost us over $16,000 in extra interest, and we’re realizing that between permit delays, unexpected timelines, and holding costs, hard money is taking $40,000+ off the top—and that’s before we even list the property.
We originally went the hard money route so we could scale and do multiple projects at once, but now we’re questioning if it’s even worth it. We can buy in cash, but didn’t want to tie it all up in one property. At this point though, it’s feeling like hard money is setting us back more than helping us grow.
Is it smarter to just buy in cash, at least until we have more efficient systems and reliable contractors? Or is there another approach we’re missing?
Any advice or shared experience would be appreciated.
Depending on what you have in Capital... the developers I work with get their plan in place and use a combination of the two types. For example: If you say permitting delays you, then use your cash for the preconstruction and permitting. Line up your contractors, If you have enough available then even a portion of the start of your project can paid for in cash. When the time is right and you feel confident on your schedule, then you can close on your loan and reimburse yourself. Not all lenders go for this but you can shop around and find the ones that do.
@James Derry That's a good idea but even contractors are delaying me as well. So that wouldn't really save that much money. As well as how many months the house will sit on the market. I'd rather pay house cash then rehab budget. Rehab budget cash doesn't really save anything because it's so small compared to purchase price