Real Estate Investment Financing Strategies : When Hard Money Gets Hard
We bought a house in West Ashley on October 5th of last year. The property is a good example of the typical house that we buy. It’s a 3/1 ranch style brick home built in the 70’s around 1,200 square feet. I will say that we added a half bath for marketablity reasons so it’s actually a 3/1.5 now.
To finance the property, we borrowed money from one of our hard money lenders. He charges us 4 points and 1% a month (0r 12% per annum) for the first six months. After 6 months has elasped, the rate jumps to 3% a month (or 36% per annum). As you can probably tell, our goal is always to cash out that financing before our six months is up.
In the case of this property, our time is getting tight. Our six monts is up on April 5th and we still have 2-3 weeks left in the renovation. Our planned exit strategy from the beginning has been to sell the house, but now I’m having second thoughts.
This type of renovation would normally take us a couple months max to knock out, but due to various fires we have been putting out, it got pushed to the side. Sooooo, now what do we do?
Fortunately, we have some resources to refinance the property and just started the process. Being able to switch exit strategies at this point in the deal is a good option to have. Had we not been in a position to do so, we could have paid dearly.
Make sure to leave yourself mutilple exit strategies in every deal. That way, if your plans fall through, you can move on to plan B.
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