Understanding hard money and brrrr

[Kenneth Vasquez]

Hey guys,

I'm having a hard time understanding something. Let's say you do a brrrr deal and the ARV of the property comes back less than expected. You've gone to a bank that tells you they'll let you cash out at 75% LTV, but when running your numbers, you realize that this is less than you borrowed from your hard money lender to do the deal in the first place. Here's a simple example (because I'm a visual learner lol):

Assumed ARV = $115,000

Purchase Price + Cost = $45,000

Rehab Costs = $35,000

All In Costs (total above) = $80,000 financed fully by a HML

But then the appraisal comes back at $100,000 and you're only able to obtain an 75% LTV, meaning you'll only cash out $75,000. How do you pay your HML when you weren't able to pull all of the money out of the deal? Are you basically SOL?