Stuck Money

By Vena Jones-Cox

Does it seem to anybody else like the easy availability of financing has gotten sticky, especially at the person-to-person lending level, but even with some more conventional lenders?

I don’t necessarily mean that there’s less money out there—though maybe there is, because I know more investors right now with truly failed deals than I’ve seen in over a decade. I mean that the same money is staying tied up in deals longer, creating a domino effect.

Here’s what I’m seeing:

A private lender makes what’s supposed to be a six-month loan.

The borrower’s exit is to sell the property or refinance into a DSCR loan.

But then the property doesn’t get any offers. Or the appraisal comes in low. Or the DSCR lender moves at the speed of cold molasses or suddenly wants to reduce the NOI by 20% because the lease is month-to-month instead of for a year.

So the sale or refinance doesn’t close on time.

So the private lender doesn’t get his money back in 6 months.

Which means that lender no longer has the money available for the next loan they already committed to make.

Which means that the next borrower can’t close, either.

One of these delayed sales, missed appraisals, or unpaid lenders can tie up the same dollars through several deals.

More money stuck in properties means less money on the street means more private lenders getting more conservative, and it’s not hard to understand why.

They’re less excited about loans with no monthly payments. Less excited about lending even their best borrowers 80% of ARV. Less excited about lending to borrowers with no reserves and on deals with no plan B.

They want more equity, stronger borrowers, clearer exits and better protection against delays.

And even the lender who has always funded your deals may not be able to fund the next one. Their money might still be trapped in someone else’s “six-month loan” that is now entering month nine.

So I think there’s an important lesson here for buyers:

2026 isn’t 2022. You can’t build your acquisition strategy around the assumption that someone will fund a marginal deal because they’ve done it before.

You need to create better deals.

Deals with enough equity that they still work if the appraisal misses—or if the likely sale price of the deal is LEGITIMATELY less than it was when that comp sold a year ago, as I’m seeing in my market.

Deals with enough cash flow to support actual payments—NOT with the DSCR requirement that the rent be 1.25x the PITI payment. That’s not cash flow. If you don’t know why, you should go back and get educated about how rental expenses work.

Deals with more than one realistic exit.

Deals that give the lender enough safety—and enough upside—that saying yes feels like a no-brainer.

And you probably need more lender relationships than you think you do, because “I’d love to fund it, but my money hasn’t come back yet” seems to be becoming a much more common answer.

Is anyone else seeing this? Are private-money and DSCR loans getting slower or more conservative in your market—or am I just encountering a weird cluster of constipated deals?