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I started a flip in 2019 and now I am nearly bankrupt. Can you help?
I purchased 1646 S Delaware St Indianapolis IN 46225 in October 2019 for $56,000 and had a quote from a contractor for $101,777 with expected completion of March 2020 The appraisal for a full renovation came in at $247,000
I made the mistake of paying my contractor too much up front.
He admitted to using my money to finishing other projects and because of the covid shutdown, he did not get other projects to provide funding for my project. I have paid over $145k and they are still asking for more money. I have about $12k left in my business account and have just under $3k per month in carrying costs. Can you help?
Perhaps this could be a show where you help flips gone wrong?
Here is a draft of an email I will be sending my contractor tonight:
Hi Jeff and Kelly,
I wish to summarize some key points to our deal - please correct any errors or difference of opinion.
You have recently sent me two invoices that total $21,483.16 for work to finish 1646 S Delaware. The original estimate was $101,707.45 and Jeff told me to the side that it might be as high as $111,707.45; the original timeline was to be finished in March 2020, but Marion county was shut down until mid May 2020. The recent invoices show that I have paid a total of $145,936.57 - this does not include about $10k paid for work on 1653 S Delaware, nor does it include the payments for the work at 2382 Woodcreek Crossing Blvd, nor does it include the $2000 I paid to Jeff as a personal gift to help get through the covid shutdown. Since the covid shut down was lifted, I have accumulated over $40,000 in interest and late fee payments to my lenders because the work has not been completed.
Jeff and I met in May 2020 when the shut down was lifted to plan the completion of the house which Jeff guesstimated to be mid to end of June 2020.
At that time, there was no dry wall as we were waiting for HVAC. HVAC work was not completed until July, and Jeff and I rehashed a new project plan putting the completion to be mid September 2020 I communicated to Jeff that I was paying close to $3000 per month in interest, insurance and other fees until the house is sold. In October, we guessed that I had paid about $130k but only about $80k of work had been done. Jeff told me that he had used my money to complete other jobs, and he had planned to get more jobs to collect money to complete my house; the covid shut down prevented Jeff from getting those extra jobs to pay for the work to finish my house.
At that time, we agreed that since I had already paid more than the max bid projection, that I would pay for materials and Jeff would complete the project before end of 2020. In November, I lost my source of income which was how I was paying the $3000 per month carrying cost; Jeff assured me again he would finish the house promptly before I ran out of money. There was theft and vandalism in early December which Jeff projected would set us behind about 3 weeks.
My business account is down to $12k which is about what I will need to pay for the monthly fees if it is listed in April and the sale closes in June. I will have to borrow more money to finish the project.
With the amount of money I have paid and the promises I have received that the house would be finished in June 2020 then September 2020 then December 2020, my concern is that if I pay you this money all up front, it will disappear, and you will be asking me for money again in May.
I am desperate, so here is my offer. If you will finish the house by the end of March, I will pay you $21,483.16 If you are out of funds to buy materials, I will buy the materials directly from the vendor and pay you the $21,483.16 minus my cost of materials when it is completed at the end of March 2021.
1) Please let me know if you have a different recollection of the points I made above
2) Please let me know if you will finish the house by end of March.
User's recommendation: Pay for materials in advance and labor when the job is done =(.
Location: Indianapolis, Indiana