I have this large mixed use commercial building which I have mentioned from time to time here. When I obtained the present mortgage it appraised for a figure X which was in the vicinity of ten decent homes. it is excellently located right on the courthouse square at the intersection of main street and the other main drag through town, good for businesses, and right on the free shuttle which serves Purdue Campus.
The borrowed money financed the purchase and most of a complete remodel of the structure from top to bottom with the idea of selling it off and doing another building when maximum value was achieved. It is the second largish commercial building I have bought refurbished and or repurposed.
My intention was to keep doing it as I did well on the first one and hoped it was an infinitely repeatable pattern with real estate being the most stable investment possible. The intent was to refurbish over a ten year period and then sell and do it again until there was enough accumulated to not need to work and risk any more.
During the last 24 years I have been pretty aggressive with my investments, working a lot of hours, borrowing the maximum and "keeping all my money on the table" so to speak.
After about eight years I had pretty well maxxed out what the building can be and the possibility of borrowed money we experienced the financial bubble/collapse.
Although my vacancy rates are excellent with a great location and amenities people love, the cost of owning the building has crept up and up along with the adjustable mortgage and with a few key commercial vacancies making the payment has been a problem.
While making significant payments but short of the specified amount for the last two years, I have been negotiating with the bank to refinance and get the interest rate down or some debt forgiveness.
About a year ago I looked at converting the second floor which is currently very nice office space that is nearly 100% remodeled within the last ten years, and in fact got as far as making a loan application with the intent of maximizing the income for the building along with redoing the main mortgage.
So the bank ordered an appraisal nearly a year ago and the results came back with the building at a value which is about .66 X, (X being the original amount it appraised at when getting to the current mortgage).
So any additional borrowed money was out. Then the bank began making more aggressive comments verbally, trying to get me to walk away from the building and just turn it back over to them.
I spoke to a bankruptcy attorney about my options should they move to forclose and he encouraged me to dig in my heels, which was my inclination in any case. So with his encouragement I told the bank that i would definately go to the mat before walking away from every penny I ever earned which was invested in the building.
All the time this was going on I continued to make payments which would cover a mortgage with either a reduced interest rate of reduced loan amount.
So finally in the last few weeks it appears that the bank will move about 25% of the loan amount into a second note which in three years will be reduced by 50% with the balance forgiven, if I am current at that time. It is not as sweet as the attorney originally said he could get for me in court but almost immediately after I hired him he started backing away from what he thought he could get me there, so it looks reasonably attractive.
With any luck I should be able to make the payments in full from here on out.
My goal is to either pay it off at which time i would be 89
or simply pay the balance down until it can be sold and realize a profit of enough money to last me until I don't need money any more.
It goes to the loan committee this morning. It appears it will be approved.
My former business partner (before it all went to hell
) had a phrase..."going over the hump".....at which point in life and or business you no longer need to worry about going broke. Someone would come up in conversation and he would say....."oh yeah,
He is over the hump." So naturally I have been hoping to get over the hump myself. With the collapse of the real estate market a few years ago I felt pretty uncertain if i would ever make it over the hump.
When folks would ask how things were going with my building, I'd just say, "well, I'm not broke yet and in the past few years people who are a lot smarter and more experienced than me are". Then I smile.
So with this restructuring approved It appears that I will be able to make it over the hump.....it is even possible I am there already and just didn't realize it.
And next semester i will be teaching two sections of
Construction Drawings at Purdue so that along with managing the building should provide enough income to make ends meet as long as I don't get too crazy with spending.
I also will make the observation that the real estate investment/developing game is never certain. I personally know of at least four individuals who accumulated a lot of real estate but got too far upside down and ended up committing suicide. That is never necessary or the right thing to do. It only ends the struggle for the individual. it leaves their loved ones out in the cold.
In the real estate game as in life, perseverence is the most important thing.....and remember the old real estate rule....location, location, location.