Advice needed on Flip Disaster

[Scott Bogue]

Need some much needed advice and path forward. I bought a wholesale property last January using a hard money loan with 80k in renovations. My General Contractor ended up being a horror story and stole money as well as the AC unit. She used unlicensed contractors and was served with a Stop Work order from the city. After she received the stop worker order she stopped responding and pulled all of the contractors who were working on the job. The house is about 70% complete but still needs electrical, plumbing, and AC brought up to code and the finish out to be completed. I have had a couple of estimates to complete this work and it ranges anywhere from 40k to 75k. What do I do? I dont have enough capitol to get it list ready. I am not sure if selling to a wholesaler would be feasible as we owe 151k on the loan with the ARV being in the 250k range. I also dont have enough cash on hand to hire a lawyer to go after the contractor at this time (I doubt she has the assests anyway). Please help

[Jay Hinrichs]

Geez I would be talking to your HML right now as I doubt they want to take it over.

and try to get a workout with them ASAP.. sounds like its going to be  a loss anyway you cut it and I have to think you put up cash for a down payment as well.

maybe someone else will have some pearls for you.

Wholesaler is going to low ball you for sure.

[AJ Exner]

Quote from @Jay Hinrichs:

Geez I would be talking to your HML right now as I doubt they want to take it over.

and try to get a workout with them ASAP.. sounds like its going to be  a loss anyway you cut it and I have to think you put up cash for a down payment as well.

maybe someone else will have some pearls for you.

Wholesaler is going to low ball you for sure.

Absolutely 2nd Jay on this one, reach out to them and talk to them about the situation. They might request to re-process some aspect of the loan or to show some proof of some things, but most lenders don't want to deal with all of the back-end stuff on something like that. 

Unfortunately, it is likely a loss if you were planning on keeping it, but hopefully it won't be a true loss for you.

Good luck!

[Keyona Taylor]

Quote from @Scott Bogue:

Need some much needed advice and path forward. I bought a wholesale property last January using a hard money loan with 80k in renovations. My General Contractor ended up being a horror story and stole money as well as the AC unit. She used unlicensed contractors and was served with a Stop Work order from the city. After she received the stop worker order she stopped responding and pulled all of the contractors who were working on the job. The house is about 70% complete but still needs electrical, plumbing, and AC brought up to code and the finish out to be completed. I have had a couple of estimates to complete this work and it ranges anywhere from 40k to 75k. What do I do? I dont have enough capitol to get it list ready. I am not sure if selling to a wholesaler would be feasible as we owe 151k on the loan with the ARV being in the 250k range. I also dont have enough cash on hand to hire a lawyer to go after the contractor at this time (I doubt she has the assests anyway). Please help

I'm sorry to hear about your struggles. First, consider finding a reliable contractor who can finish the work within your budget and try negotiating the cost. If you need extra funds, explore hard money financing options again. Selling to a wholesaler might be a way to get out, but ensure it covers your loan. Also, keep records of your contractor’s issues in case you decide to take legal action later. Lastly, consider joining local real estate groups for advice and potential support. Hang in there, and good luck!

[Ryan Irwin]

Agree with the above posts.  Another option might be to wholetail the deal to another investor.  Perhaps feel out the market with some of your local contacts and see if there is interest.  Additionally, talk to your realtor and get their feedback as well. 

[Bryan Hartlen]

Depending on how long it will take to complete the remaining work and get the property sold, you could also try to find a larger general contractor; one that could self fund the work in return for a higher payday at closing.  Eg if they quote $40k for the work pay them $60k.  It looks like you might have enough room to do this. 

[Jonathan Klemm]

Hey There @Scott Bogue - First just a heads up - YOU ARE NOT ALONE & YOU WILL PERCEIVER!

I hear similar stories probably about every other week here in Chicago, and I have had some situations happen to me during one of my early-on flips.

Whatever you do , NOT take the low guy unless you are 100% certain they can complete the job.  I found in these situations sometimes you have to over pay a bit ensure the job will get done so you can move forward.

At this point, time is your worst enemy, but that doesn't mean rush.  Slow is smooth and smooth is fast in these situations.  Get a good General Contractor, write a proper contract with proper payment milestone schedule.

If you don't think you can come up with the money to finish it get out from under it and talk to your HML ASAP like @Jay Hinrichs mentioned.

Happy to connect and talk through the situation more if that would help!

[Shannon Mogilinski]

Hey Scott--So sorry to hear that is terribly stressful--I will send a connect request and call me if you want to discuss or reach out to Jonathan from the post above--you need a bit of guidance from a good GC (which I am as well as a full-time flipper)

[John Clark]

Quote from @Scott Bogue:

Need some much needed advice and path forward. I bought a wholesale property last January using a hard money loan with 80k in renovations. My General Contractor ended up being a horror story and stole money as well as the AC unit. She used unlicensed contractors and was served with a Stop Work order from the city. After she received the stop worker order she stopped responding and pulled all of the contractors who were working on the job. The house is about 70% complete but still needs electrical, plumbing, and AC brought up to code and the finish out to be completed. I have had a couple of estimates to complete this work and it ranges anywhere from 40k to 75k. What do I do? I dont have enough capitol to get it list ready. I am not sure if selling to a wholesaler would be feasible as we owe 151k on the loan with the ARV being in the 250k range. I also dont have enough cash on hand to hire a lawyer to go after the contractor at this time (I doubt she has the assests anyway). Please help

Contact the district attorney/state's attorney/whatever and institute criminal charges. They can make restitution part of the sentence, and it will stop her crap from harming people down the line.

[Mohammed Rahman]

Hey @Scott Bogue,

That sounds like an absolute nightmare, but unfortunately, you’re not the first to experience contractor issues like this. Here's a potential path forward for you:

1. Get Detailed Bids: First, it’s essential to get more accurate bids from licensed contractors for the remaining work, not just a range. The clearer the scope of work, the better you can plan next steps. Also, ensure they know about the Stop Work order and have a plan for handling it.
2. Negotiate with Your Lender: If you're stuck financially, reach out to your hard money lender ASAP. Explain the situation and see if they’re willing to extend terms or provide additional funds to complete the renovation. Some lenders might allow you to add renovation costs to the loan to help you finish the project and avoid a loss.
3. Explore Other Financing Options: If your hard money lender isn’t flexible, you might consider private lending or even a joint venture with another investor. They could provide the funds needed to complete the project in exchange for a share of the profits. Since the ARV is decent, it might be worth bringing someone in to help.
4. Sell as-is: If financing options don’t pan out, you could consider selling the property as-is. You might not get the full ARV, but in today's market, many investors are still looking for properties with potential upside. Yes, you owe $151k, but if a cash buyer sees the value, you could minimize your losses.
5. Legal Options: I get that hiring a lawyer isn’t feasible right now, but I would still document everything (contracts, payments, correspondence) in case you’re able to pursue the contractor legally in the future. Even a small claims court option might help you recover some damages later on.

It’s definitely a tough situation, but focusing on getting a clear bid for the remaining work and being upfront with your lender could provide the best path forward.

Wishing you the best with this—stay strong!

[Gary Nelson]

It sounds like you're in a tough spot with this flip, and I can understand the frustration. When a project feels like a disaster, the first thing to do is reassess the numbers. Get quotes from multiple contractors to know exactly what it will take to get the project back on track. You may also want to consider reaching out to a real estate agent who works with investors—they can advise whether selling as-is or finishing the work will provide the best return based on your local market conditions. Sometimes, a fresh perspective can reveal options you hadn't considered.