I've been working hard on a commercial deal that just didn't make sense.
It started back here: http://activerain.com/blogsview/60085/-Commercial-is-Different
The clients made some pretty serious mistakes prior to coming to me.
- They bought this 6 unit apartment for too much money,
- They bought in the wrong neighborhood,
- They bought in the wrong city,
- They bought in the wrong market,
- They bought the building in the wrong condition,
- The Rent Roll was too little,
- The Loan amount was too high,
- They financed with the wrong loan terms.
In the end, (and it's nearing the end for them) this little foray into income property investment is going to cost them and there is little I can do to stop the impending doom! This saddens me greatly. I just came into the picture - I wasn't a part of the purchase, or the last refinance. I only was called to the party a couple of weeks ago.
My client isn't a real estate speculator. She's a single mother and grandmother. She's a full time RN with 20+ years on the job. She's facing upcoming retirement soon and this venture just took a serious chunk out of her future. Starting next month she'll probably start to fall behind on her payments. Her credit will be trashed, it's already taken a serious hit with mortgage lates. The building will go NOD and then Foreclosure. The $250,000 in equity she once had will vaporize. She has a home loan she needs to get out of as well but I can't touch it with her credit scores.
I've tried traditional commercial lenders, Hard Money commercial lenders. I've looked at ways we could bring a family member in to help secure better financing. I've looked at selling the property to a family member. Yet, everything I've tried - nothing makes sense. The numbers just don't add up. The property doesn't cash flow.
So in the end, despite all my best efforts, they have literally and financially Painted Themselves Into A Corner.
You can put the blame on the borrower. Or you can put the blame on the Realtor, or the mortgage person. It doesn't matter, in many ways they are all to blame.
In the end I know of a pretty little 3rd grader who's Grandmother isn't going to be able to spoil her in the way she should and that's just plain sad.
;)
;)
The buyer is the only one to blame. If you are going to take on an investment of this type, you should have done your due diligence. Ultimately the buyer decided that they wanted to pay too much, in the neighborhood of their choice, in the city and market of their choice, in the condition of their choice, with the rents and loan of their choice. People really need to start taking responsibility for their own actions. At any part of this purchase, was there a gun to her head?
Don't get me wrong, this is sad. It happens often, but it is because people enter into large purchases/investments way too lightly.