Need Advice – Sell Now or Refinance Hard Money Loan?

Question

Hi everyone,

We’re facing a tough decision with our investment property in Chandler, AZ, and would love some insight from experienced investors.

Here’s our situation:

• Purchased with a Hard Money Loan – Current balance: $300,000
• Recent Appraisal: $385,000
• Already Invested: $97,000 in renovations
• Rent: $2,000/month, which isn’t      covering refinance requirements
• Refinance Roadblock: A DSCR lender is requiring $34,000      cash to close to refinance.
• Listing for Sale: We’ve relisted at $385,000,      hoping to exit cleanly.

Our Dilemma:

• Should we keep pushing for a      refinance with another DSCR lender or sell and move on?
• Are there any alternative      financing options (private lenders, or portfolio loans) that might work      better?
• What’s the best way to attract buyers quickly without losing more money if we sell?

And yes, we recognize that our rehab decisions may not have been ideal - our initial intent was to sell the home, and not rent - so we kindly ask for constructive advice only.

We appreciate any advice, especially from those who’ve been in a similar situation!

Thanks in advance!

ShaRae K.

Andrew Postell · Answer

@ShaRae Kalian yeah, this is a 100% sell scenario.  There's likely no other financing here that would give you a better scenario.  Meaning, if with NO ratio on a DSCR loan...so less money to refinance...but you would be bleeding money every month on negative cashflow.  So, sell the property.  Nothing wrong with making a profit on a flip.

Ko Kashiwagi · Answer

What's the payoff? There are DSCR programs out there that could do a higher LTV if you you rent out as STR or if you use "negative DSCR" programs, which some go down to 0.7 DSCR.

However if you are not optimistic about the appreciation, investment wise it may be a sell

Patrick Roberts · Answer

$288k is 75% LTV. Also, at $275k on a 30yr FRM and 7% on the note, the P&I is $1830/month. Given the figures youre providing, youre probably getting hit with a restriction on LTV and loan size due to the debt service (or lack thereof). This means youre going to need to bring additional cash to close to payoff the existing lien because it has a balance of $300k and your borrowing less than that. The $34k cash to close is probably a mix of loan costs, prepaids, and the remaining needed to buyout the hard money position.

Mason Weiss · Answer

Is the property already occupied at $2K a month or is that the projected rent?

Also, I would think there are other DSCR options out there that might not require you to bring so much cash to the closing table.

A lot to talk through so it is difficult to give an answer in an online post, but if you want to discuss it more by phone I can try and help any way possible.

Patrick O'Sullivan · Answer

Hi ShaRae—thanks for sharing the full picture, and sorry you’re in a tough spot. It sounds like you’re handling this with a clear head, which is huge.

Given the numbers you’ve provided, I agree with others that selling seems like the most practical path—especially since holding or refinancing could lead to more monthly losses, and you’re already carrying a hard money balance that’s tough to offset with the projected rent.

That said, if you’re still marketing the property, here are a couple quick thoughts to possibly improve traction:

• Highlight the recent renovations clearly in the listing—buyers often overlook rehab work if it’s not framed in a compelling way.
• Consider incentives like a rate buy-down or closing cost credit if it helps move things faster.
• If the property is vacant, staging or even virtual staging could go a long way in helping buyers connect emotionally with the space.
• And as Jackson mentioned, short-term or mid-term rental income (if zoning allows) could help offset holding costs while you wait for a buyer.

Highlight the recent renovations clearly in the listing—buyers often overlook rehab work if it’s not framed in a compelling way.

Consider incentives like a rate buy-down or closing cost credit if it helps move things faster.

If the property is vacant, staging or even virtual staging could go a long way in helping buyers connect emotionally with the space.

And as Jackson mentioned, short-term or mid-term rental income (if zoning allows) could help offset holding costs while you wait for a buyer.

Most importantly, you’ve learned a ton from this deal—and that will pay off down the road, even if this one doesn’t finish the way you hoped. Wishing you a clean exit and a solid reset for your next project!

Jackson Harris · Answer

Hi ShaRae, I think this is definitely a sell situation. A lot of investors are in your same position at the moment in the local area and are AirBNB-ing the properties while they're listed on the market to at least make back some of the holding costs.

It's not ideal, but I don't see refinancing really being the best strategy since you have to bring cash to close, so if you can get an extension or are ok with the term you have left on the HML then I'd stick it out on the market.

ShaRae Kalian · Answer

I truly appreciate all of the valuable insights! To address some of the questions, we have a 750+ credit score, the original payoff amount is $301,000, and the 2k a month is the projected rent. Based on the collective feedback, selling may be the best course of action. We’ve relisted the home at the appraised value of $385,000—while we may not walk away with a significant profit, at least it prevents further financial strain. Again, thank you all for your guidance!

Chris Seveney · Answer

That seems high for DSCR and closing costs, but depends on your credit score , LTV and DSCR ratio they will go to. Based on numbers may not work as a DSCR anyways but what was the contributing factor for bringing $ to the table - then others can address it more clearly and see if its an expensive DSCR loan or somehing behind it.

Need Advice – Sell Now or Refinance Hard Money Loan?

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