Category : Blogs
Pitfalls of Borrowed Money
The topic I’d like to discuss today is the pitfalls of using borrowed money to replace your income in lieu of developing your real estate. I made a special trip yesterday hoping to find out why one of my borrowers had stop making their monthly interest payment. I was unable via telephone calls, emails, letters and text messages to get a response, henceforth a 1.5-hour trip. Upon arriving shortly thereafter, I was able to touch base with my borrower. The discussion inevitably led to the question of how come you stopped making your monthly payments?
The answer was she had decided it was no longer in her interest to keep pouring money into the project, given that her partner was moving forward to litigate the value of his equity and collection thereof. So here we sit, they have a project that in my opinion needs roughly fifty thousand to complete, and now the cost of their borrowed money has been adjusted to the default rate of interest for failure to meet their monthly interest payment. And now, the borrower claiming the other partner mismanaged part of the borrowed money. At this point I’m only privy to one side of the story.
The sad truth is both parties are looking to profit from this incomplete real estate venture, instead of realizing the importance of putting aside their differences and moving forward to complete said venture. Now the money goes to pay lawyers. The incomplete real estate venture is on the market at a sales price of a completed project, and both parties waiting for a favorable outcome in opposition to their counterparts. Between both parties, they have managed to build the perfect house of cards, and unfortunately in the end, neither party will in my opinion benefit.
Moving Forward is a Choice
If they could only set aside their differences long enough to complete the project, I’m sure they would both walkaway with a healthy return on their investment, rather than who is to blame for this failure. Moving forward in life is your choice, so I suggest learning to compromise. Otherwise, the end result is your own house of cards.
-Nathaniel Fulford V