Private Investor Issues
How do you keep a private investor from screwing you over by backing out of the deal at the last minute?
Can't do much.Just like I can and have backed out on my lender at the last minute with penalty or cost (unless I backed out after paying for things like an appraisal, in which case that cost is sunk), they can do the same. It's a jungle out there.
There is no sure fire way to 100% prevent it, however, this is what I do: Each investor I add to my list, I inform them upfront that if they commit to funding the deal and then back out, I will never do business with them again and may tell others in my inner circle about my experience with them. Being upfront about this rule and spelling it out has helped me avoid that. I instituted this rule and upfront disclosure after a private investor backed out of an $800k investment about 5 years ago on a Friday night when funding day was the following Monday. I had to scramble to raise $800k over a weekend so that I did not burn my bridge and performance history of closing on all transactions on time that I commit to.
