Exit stratagies for a flip

[Kevin Hart]

Hey BP'ers I'm in the process of finding my first property to rehab, but still figuring out my financing options. My questions is about exit strategies. I've been searching the forums but couldn't find what I was looking for. So my question is: if I finance with a hard money loan but my flip isn't selling, what's the best exit strategy if my time is running out on the loan? Can it be converted to traditional financing? Considering it would be my first flip, is a hard money loan too risking or should I stick to traditional financing for my first time? I just bought my personal residence in April, so I already have a mortgage in my name. Thoughts? Thanks Kevin

[Account Closed]

I have two schools of thought on this depending on where I have been in my investing career.  A few years ago, I was doing just a few homes a year, and I couldn't afford a loss.  I had a property that wouldn't sell, so I refinanced with a lender and kept as a rental.  Actually, I sold it on a wrap around, took it back when they defaulted, rented it for a bit, and then sold to another investor, but that's another story...

Now that I'm doing much more volume, and running a true business, I would prefer to discount the property to get it off my balance sheet, even if that means taking a loss unfortunately.  No matter what though, make sure your lender gets made whole.  I've been in that situation as both a borrower and as a hard money lender.  In both cases, reputations were built and respect was gained when lenders get paid back in entirety, even if the project takes a loss.