If you use a hard money lender on a real estate rehab deal, keep an open door policy, especially when times get tough. Here’s a good story about why this is a good policy. We made a hard money loan on a rehab project that went “south,” as they say. The borrower’s partner ran away with the funds to renovate the property and, rather than let us know there was a problem, the borrower tried to hide it from us. After several late payments on the loan, we contacted the borrower and he finally told us his tale of woe. We were able to help the borrower by using our contacts. One of our contacts in the real estate investor community decided to partner with the troubled borrower on the deal and ended up saving it. The property was completed in less than 3 weeks and on the market, and we didn’t even have to lend the borrower more funds to complete it!
If you encounter major problems in a real estate deal, don’t clam up! If you have a hard money lender that you know and trust, use their resources when times get tough.
Posted by Corey Curwick Dutton
On one of my first rehabs I had an issue relating to major unexpected deficiencies in electric and plumbing systems that were exposed in demo and not in the budget. I delayed telling the lender because I thought it would hurt my credibility on future deals.I never asked for extra money and never was late with a payment but I was not as quick as I should have been in completing the project.
Long story short, I got all the work done but it took way longer then it needed too, but I got it done. I am sure my lender was not unhappy because he got a couple of months extra interest payments out of it, but we probably could have finished 2 months earlier and with a TON less stress. Saving time and major up at night type of stress might have let us get another deal done that year that we didnt.
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