In your opinion whats the biggest risk with using hard money? and how do you manage that risk?
The project gets delayed, or your contractor blows the rehab. Run out of liquidity and get foreclosed
@James Guilford When the scope of work expands beyond what the original intent was estimated to be. This can easily cause a dip in reserve funds to complete the project. Delays in the rehab phase are also costly as you pay more into interest and lose potential rent that could have been made. Ways to mitigate the risk is to continue strong communication with contractors with weekly status updates. Include a buffer of reserves in case extra work needs to be complete. Walk the property yourself for verification of work completed. Good luck
Biggest risk is not analyzing the deal property
I build in 6mos of hard money interest into my budget, if the refi number won’t cover that, I don’t touch it
Thanks for the feedback, I always enjoy different perspectives regarding risk
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