Hard money loan to finish construction on primary residence?

[John Derheim]

Hey everyone, 

A friend of mine has come into some hardship, she sold 2 of her rental properties in an attempt to build a 1 bedroom home for retirement in northern California, she bought the land outright, and has finished 50-60% of the construction paying out of pocket so far.

She estimates that she will need 100-120k to finish the house, after paying for some unforeseen expenses in regards to her family, she has run out of money. I've recommended a hard money loan to finish construction, then a collateralized loan to pay back the hard money loan, similar to BRRRR, but for a primary residence.

Of course if I was in her shoes I would have done heloc's to access the equity in the properties that way and left then as rentals, but she decided to sell them and put all her eggs in this basket.

Does anyone have any advice on what her path forward should be? 

Her credit is not the best approx 560, and she has no income W-2 wise, but does some contracting work here and there. I was hoping she would approach this differently, but the situation has changed a lot over the last 2 years.

Thanks for reading!

[Aaron Pfeffer]

No such thing as a hard money loan to complete construction on a primary residence. You can do a hard money loan on a primary residence as long as the money is clearly being used for a business purpose, but hard money is not bailout money for a homeowner. And that's what this sounds like she needs. Sorry to paint it clearly...but it sounds like your friend has to take the loss here and sell to someone willing to take the project off her hands. And if you do find a private beneficiary willing to make the loan to her to complete the project? Don't take it...for her sake and for the beneficiary's.

[Issac San Miguel]

Agreed with Aaron Pfeffer, typically I am all for getting creative to try to keep a project alive - but in this case - it sounds like it may be the best idea for her to clean break and sell the project to someone as-is.

[Cal Martin]

Hey John! We just had a lender come in to our brokerage and speak to us about ARMs and lending on land. If she bought the land outright then she can use that land as collateral on a construction loan to finish the project. Now I don't know about the value of land in her specific market but if it is similar to other northern California markets I hear about then it shouldn't be an issue to cover the 100-120k bid she needs to finish the construction.

Hopefully this is helpful!

Cal 

[Theresa Harris]

If she does contracting work 'here and there', why doesn't she do that full time to earn more money and then over see what she can on the construction of her own home?  Can she pull money out of her primary residence?  Otherwise if the shell is done and the structure is enclosed, can she press pause for a month or two until she can figure things out?