Help!!! I need a solution FAST!

[Brian Watkins]

As I was following up with leads and investors I've worked with in the past I came across a problem one of my colleagues is facing..

"Im in about $38K from my personal investment and loan payoff around $52K. So I would need about $90K just to break even and I'm still paying $800 hard money note. Using a quote of $22K to finish the rehab. I'm looking at needing to do a retail sale or buy and hold at $112K. Im willing to do what ever is needed to get out of this mess."

She fell into this hole because a Contractor ran off with her money after doing very little to no work. ARV on the duplex about 6 months ago was $105K. Can't be much more than $110K now. Potential Rental Income = $1,600-$1,800/month. Property located on the Atlanta Beltline which is part of the reason why she does not want to let it go. Any suggestions on how I can help her? I sense motivation however I can't see a solution through the numbers.

[Jon Holdman]

Rookie mistake #2 - thinking that how much you have invested has ANY influence on the sales price. If its worth $110K and needs $22K in rehab, she's going to be lucky to sell it for $60K or so to another rehabber. I was the lender on a very similar deal, though it was doing unpermitted work and getting caught that created the problem rather than a contractor running off with the cash. Has she offered to give it to the HML as a deed in lieu of foreclosure?

Or, sell it as-is to try to minimize the loss.  But a loss here is almost a certainity.  If she completes the fixup for $22K (and what estimate has ever come in on target), she's into it for $112K.  She sells for $110K (the market doesn't care about how much was spent).  Paid $10K in commissions and closing costs and walks away with a $12K loss.  If that takes three more months, add in another $2400 in payments.