Harold its risk reward and what your comfortable with.8% is basically bank money I borrow from banks at 1 and 5.5 to 6.. so 6.5 to 7% apr.. and those are FULL doc deals with PG's etc.at 8% I would want to know this guy has money and get a PG  ( personal Gurantee) you may also ask for some equity as well.. very common in these deals.. its called a participation mortgage I have been doing those for 30 years they work great.ground up construction is risky from a lender point of view.. you have things to think about and worry about.1. what happens if it gets half way done and the builder walks.2. are the subs being paid... you want to monitor that as well.some things to think about.and generally I am not one to run off to an attorney at the drop of a hat.. but for a 500k deal I would have an attorney write this one up for you and go through the risk factors in your state

Often I find:"Sales disqualified as a result of examination of the deed"followed by either: "Disqualified (Doc Stamp .70 / SP less th $100 / Other Disq)"or additional info indicating a transfer of deed where "no doc stamps were paid" usually with like a hundred dollars in place of the price, otherwise often I'll see a small price back around 20 years ago for under 20k, which I'll usually use for my records as the last sales price. 

So on day of inspection there were a few problems worth addressing, including a very small leak from the attic into the upstairs bathroom (it just so happen to be raining on day of inspection) that turned out to be a half dollar size hole in the roof (per inspector).

Once we started breaking things up I found 6" of concrete base under the tile, and rotting joists from a combination of a leaking bathtub, termites, and water coming in from a vent in the crawl area under the house.

Florida Bar Lease Docs

Their are TWO kinds of metal piping in a home,,,,THOSE that leak,,,And those that are going to leak...due to rust out,/plug up. 

I had one that looks the same, once we opened it, there was a water leak that has been there for years, no foundation settlement, I assessed it to be a sink hole type and lateral movement of soil.

Title  closing costs vary) + loan doc fee $150 + appraisal $450 (est.) = $3,600 Loan is comprised of (4) draws - $150 inspection fee each = $600 (wiring funds has  a  small fee, usually around $20 each wire). (5) Months of interest $3,750 (1.25% X $60,000 X 5 months) Home sells for $100,000 Total loan cost -$ 7,950 Original lender investment -$60,000 Borrower profits $32,050 (This amount does not include title company closing costs, insurance, taxes, HOA fees, or real estate agent fees).

And I suppose the inspector didn't even ensure the leaking faucet was because it was partially on? 

I contacted another Bigger Pockets member who has been helpful and asked about hard money lenders who might be available and am awaiting a call to discuss their service.Here are a few facts around the propertyIt was listed last July and an offer was made in fall and ultimately rejected at which point the sellers upped the selling priceThere are 2 lien holders and a large debt for water which is over 10KThe water is presently off and there are some problems in the plumbing (leaks probably due to freezing)I reasoned that even though my offer was likely lower than that previously rejected, It is a cash offer and things have probably declined since the last offer (leaking pipes) also there is room for a counter.If anyone has advise for me about short sales or any good information about doing this deal in Portland, Or.