chapter  7
20 Pages

When things go wrong

ByCraig Furfine

Chapter 7 of Practical Finance for Property Investment begins with the recognition of a simple truth in property investment – sometimes things will not go according to plan. The less simple truth is that if, as a property investor, you did not borrow any money or raise equity from partners, no one but you will care. In most property investments, however, debt finance is common and significant. Thus, with some regularity, property investors will find themselves unable to satisfy the required payments on their existing mortgage. This chapter describes how such instances might occur and emphasizes that the times when properties are unable to service their debt are not random, but rather correlated with the overall economy. The chapter also outlines the various options lenders have when their borrowers cannot satisfy their debt service requirements, setting investors up for the best possible resolution of a property investment in distress. In conclusion, the chapter presents a case study illustrating how lenders attempt to resolve situations with distressed property debt in a retail setting.