Underwater Midstream Rehab Problem.

[Mark Safrin]

Searching for solution ideas here.

I have a client rehabber in Chicago who came to me halfway through a gut rehab fix and flip. Her previous contractor had grossly underestimated the scope of work, she fired him and is trying to finish it herself (She has rehabbed herself before).

-She owes $260k to her previous HML (Purchase was $213K).

- She has put $140K rehab in time and materials so far.

- Still needs $200K further rehab to finish.

Just had the the place appraised. The following values are not a typo:

- As is value: $239K  !

- ARV: $725K !

The disparity between As Is and ARV seems very strange. If this were a sale now at As Is Value there would be rehabbers shooting each other for the opportunity to stand in line to buy the place. ;)

We cannot lend her enough up front for her to pay off her current loan due to low As Is value. (Less % since she is refinancing).

Comps mid rehab are not so easy to find.  This is (now) a two story building, the comps the appraiser used were old (and looked it), single story homes that did not even have a lick of paint done to them when they were sold.

Suggestions welcome.