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Updated over 6 years ago,

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1
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Kerry Larson
  • Dana Point, CA
0
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What Loan Products Exist for Different Scenarios?

Kerry Larson
  • Dana Point, CA
Posted

How to get additional financing when a project doesn't go as planned?

Original Project: great single family fix & flip single family in affluent area of Atlanta. PP $700k, Rehab $300k, ARV $1.6-1.7M

Problem Origination: Negligent Contractor caused water intrusion & tried to fix it himself causing the damage to escalate, which increased the rehab budget and pushed back the timeline.  Didn't pay subs and then filed fraudulent liens against the property after he was fired. 

Current Problem and what I'd like to hear from you, is: What kind of loan products would provide working capital to cover the additional holding, remediation and repair costs while the insurance claim is pending and attorneys duke it out regarding the contractor and liens?  

Current status of the project is that the damage has been professionally remediated and repaired.  The scope of work has been re-evaluated and several options for new exit strategies have been identified.

Lesson learned - when hiring a new contractor, make sure you do a VERY THOROUGH search of Superior Court records in  ALL the surrounding counties for civil complaints and lawsuits - and do it yourself. Our mistake was hiring a service to perform this search and the results were an obviously inadequate and incomplete report.  Also, do a search for all the permits that a contractor has pulled in the previous couple of years and look to see if there was any time delay between the day the permits were ready to be issued and when they were actually issued. (in this case, they were ready in May and not issued until August when the contractor felt like going to pick them up). Also, how long did it take to schedule the first inspection, did the inspection pass? If not, read the notes and see why. And how long did it take to get a CofO? This is a very accurate way to check out your contractor!!  If we had done these two things, life would be completely different right now.  This will NEVER happen again!