Hard Money Loan Gone Wrong

5 Replies

I purchased a fix and flip using Hard Money Back in October. This was a joint venture where I put 10% down of the total cost to purchase and rehab and I would split the profit with the lender (80% to me 20% to the lender). Purchase price was 129,000 and estimated rehab of 100k. All in the funding company would be contributing $220,000 and I had put 25k down. I paid points on the loan origination at 0.05% and that was based on their rehab contribution of $220k.  They conducted their own inspection of the property and we drafted a draw schedule. I was to pay for part of rehab out of pocket and then be reimbursed. Problems arose when an unforseen foundation issue on an old addition put a halt on repairs. When I went to funding company for a draw to repair foundation they refused because I would not be following the agreed upon draw schedule. I had already put over 10k into this and did not have enough liquid to do the foundation repairs without a draw. I ended up selling the property without taking out any of the draws. My question is am I entitled to a refund of the points I paid on the initial loan if I never took out a draw? Its a difference of over $7,000

I think you mean if you “didn’t” take out a draw? Anyway, unlikely you are entitled to any reduction in the points, they committed the money to you......you ended up not borrowing it all due to your own issues.
If you read your loan terms you’ll have your answer.
Sorry it didn’t work out but there are Always unforeseen issues and a lack of capital does create problems.

Originally posted by @Matthew Barnauskas :

I will do some more digging. Luckily I got a good deal and was able to cut bait without taking a huge hit. 

there Is no way you should have entered a flip if you did not have reserves to cover a 10k issue.. that is being under capitalized don't do that in the future.. make sure you have enough cushion this stuff is quite common in extensive rehabs..