At the end of the day, it's a lot of risk for very little reward.

While the risk technically exists, the practical reality is that enforcement tends to be minimal, particularly when properties are well-managed and maintain a low profile within their neighborhoods.Across most major counties—Clayton, Fulton (including City of Atlanta), Cobb, Gwinnett, and DeKalb—rent-by-the-room typically falls under a “rooming” or “boarding house” classification, which is not permitted in single-family zones.

Also align leverage to risk instead of one-size caps, and reward clean execution with lighter docs and quicker draws on the next deal.

Institutional private money is really no different than Hard Money except maybe they can close a little faster but sometimes it is a title issue and you can't anyway.  

You will pay 10% penalty plus taxes on that money.

The risks are real.

I did my due diligence to make sure there were no liens and based on my observations months after the property became vacant, I felt the risk of redemption was low.After the auction, the estate of the deceased borrower opened probate.

That said, if you have strong equity and clear exit strategies, there are private lenders who may still be open to it—especially if you're open to cross-collateralizing or creative terms. those props if they are in a major city are squarely in the HOOD /  HIGH RISK or some small 5k pop town in fly over country.. just not worth the effort..

Right now, you have no experience and are asking a lender to take all the risk.

What’s your backup plan when hard money turns you down?