Real estate investors know that even the best-planned project can hit a snag.
A contractor falls behind. Material costs come in higher than expected. A renovation uncovers an issue that wasn’t visible during the initial inspection. A permit takes longer than anticipated. Your timeline shifts.
These things happen.
What can turn a manageable problem into a major one is waiting too long to tell your lender.
Communication Is One of Your Most Valuable Financing Tools
When you’re working with a private lender or hard money lender, communication shouldn’t stop once the loan closes.
In fact, that’s often when the real relationship begins.
At Low Tide Private Lending, we understand that real estate projects don’t always go exactly according to plan. Our borrowers are investors, and we know renovations can come with surprises.
The key is knowing about those surprises early.
If something changes on your project, pick up the phone and tell your lender.
A good relationship lender can often help you think through your options. But they can’t help solve a problem they don’t know exists.
What Should You Tell Your Lender About?
You don’t need to call your lender every time something minor happens on a project. But there are certain situations where communication is especially important.
Your renovation budget is changing
If you’ve discovered that your rehab is going to cost significantly more than expected, don’t wait until you’re almost out of funds to bring it up.
Your lender may need to understand what’s causing the increase and how it affects the overall project.
Your timeline is changing
Maybe your contractor is running behind. Maybe permitting took longer than expected. Maybe an unexpected repair added three weeks to the project.
If your anticipated completion date is changing substantially, let your lender know.
Your scope of work has changed
A project can evolve once demolition begins. You might discover outdated plumbing, electrical issues, structural concerns or water damage.
If the project you’re completing looks materially different from the project you originally presented, communicate that change.
Your contractor is having problems
Contractor issues can become investor issues very quickly.
If your contractor walks off the job, stops showing up, substantially changes the price or you’re considering replacing them, don’t try to hide the problem until you’re forced to deal with it.
The sooner everyone understands what’s happening, the more time there is to develop a plan.
Don’t Wait Until You’re in Crisis Mode
One of the biggest mistakes an investor can make is thinking:
“I’ll deal with it when I have to.”
That might mean waiting until you’re out of money, your loan is nearing maturity or you’ve already missed an important deadline.
At that point, your options may be much more limited.
Communication gives everyone something incredibly valuable:
Time.
Time to evaluate the situation.
Time to look at the numbers.
Time to make adjustments.
Time to determine whether the original plan still makes sense.
That’s true whether you’re working with a private lender in Charleston, financing a fix-and-flip in Columbia, funding a project in North Carolina or working on an investment property in the Savannah, Georgia market.
A Good Lender Should Be a Partner, Not Just a Wire Transfer
There’s a difference between transactional capital and relationship-based lending.
A transactional lender may simply be focused on getting the loan closed and moving on to the next transaction.
A relationship lender wants to understand the borrower, the project and what happens throughout the life of the loan.
That doesn’t mean your lender will automatically say yes to every request. In fact, a good lender should be willing to tell you when something doesn’t make sense.
But when something goes wrong, you should feel comfortable making the call.
“Here’s what happened. Here’s where we are. Here’s what we’re thinking. What do you think?”
That’s a much better conversation than:
“We’re out of money and we need to close in five days.”
The Best Borrower-Lender Relationships Are Built on Transparency
Real estate investing is already unpredictable enough.
Your financing shouldn’t add unnecessary stress.
Whether you’re using hard money for a fix-and-flip, a bridge loan to acquire an investment property, a cash-out refinance or financing for a manufactured home project, your lender should be someone you can communicate with openly.
Problems don’t necessarily ruin a deal.
Surprises do.
So the next time something doesn’t go according to plan, don’t hide it and hope it works itself out.
Pick up the phone.
Your lender may be able to help you find a solution before a small problem becomes a big one.
And that’s exactly what a relationship lender should be there to do.
Looking for a relationship-based private lender?
Low Tide Private Lending provides short-term financing for real estate investors throughout South Carolina, North Carolina and select Georgia markets, including fix-and-flip loans, bridge loans, cash-out refinances and other investment-property financing solutions.
We may not always be the lender with the lowest rate, but we believe communication, transparency, speed, flexibility and reliability are worth something.
Because your lender should be more than the person who funds your deal. They should be a partner you can call when the deal doesn’t go exactly as planned.