Funded a cosmetic flip as passive money, and the 60 day plan ran 74

I put 61k into a light rehab as a passive participant, 12 percent with a 6 point exit fee on a 60 day projected hold, secured second behind a hard money first. Operator buys at 244 in an affordable Midwest metro, 29k of scope, ARV pegged at 341.

What actually happened. Scope came in at 31.4, so 2.4 over, which is nothing. Property listed on day 44, which was ahead of plan. Then the first buyer's financing fell apart on day 58 after nine days under contract, and the second contract closed on day 74. Sale price 337, four under the ARV number.

I got paid 61k plus 1,494 of interest plus the exit fee, and the operator absorbed the 14 extra days and the 4k price miss out of a gross that went from a planned 47 to about 39. My return didn't move because my position wasn't sharing the upside. Their return dropped 17 percent from a buyer's lender problem they had no control over.

What I'd keep: the exit fee structure, because it paid me for the calendar risk without making me argue about it when the date slipped. What nearly broke it: the operator had 11k of reserves against a 1,600 a month carry, which is under seven months, and if the second buyer had also fallen out I'd have been having a very different conversation about my second position. Reserves are the line I'll underwrite hardest next time, and I'll ask what happens on the third buyer, not the first.