I'm working on 2 houses that due to unforseen circumstances I will need $10k more for each house.
In your experience if I reach out to my hard money lender can they increase the rehab amount on the loan? For some reason I doubt that's possible because we have a set amount and we've already signed all the paperwork. What options do I have besides coming up with the money myself?
Anybody else ran into the same situation, any advice would be appreciated.
They will not give you more. The rehab money you signed on was put into escrow waiting to be drawn, you signed on a specific amount. If it's 10k and the project is nearing completion you could use credit cards. Open new cards that offer 0% annual rate for 12-18 months. Once you get the property fixed up sell or refi and pay off the balances with the proceeds. If you're into a nightmare of a situation then this would be very risky and you may want to cut your losses and not go further into debt.
When this happens, you have to go to family and friends because that's the only way you won't get soaked on that urgent money. But, with that said, this is the riskiest avenue for those relationships, especially if your numbers are off or the money you get for the bridge is too small.
Your HML will likely not increase your funding. So you can go the credit card route since you are talking about $20k here, borrow from someone (private money), or get an unsecured credit line from you bank. You can also sell off other assets to raise the capital needed (if you have any).
The most important thing here is that you do not over leverage to the point where you will not have enough at exit to pay off all the debt. In the private money scenario (and if that is from family/friends), you need to really be careful as to not let them lose any money. That will almost always hurt the relationship and certainly ruin your performance history. Your word and you name is all you have at the end of the day so please ensure you have enough equity in the deal to borrow the additional funds from someone.
Lastly, analyze where you went wrong on your budget so you can make the necessary adjustments on the next deals. Either get better at estimating rehab costs or but better (with more discount at purchase) to provide a larger spread for these occurrences.
@Matthew Crivelli thank you
@Jonathan Greene Thanks
@Will Barnard i appreciate the advice.