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Exactly, came here to say this. For many that do operate the real estate there are loans to leverage the property and those loans come due if rental rates (or s
by kurthr 2y ago
Exactly, came here to say this. For many that do operate the real estate there are loans to leverage the property and those loans come due if rental rates (or sale prices) fall below a limit stated in the loan. That's part of why you'll get free months rather than a reduced rate, but also why so much is empty.
Often the commercial part of 5/1 and 5/2 designs is a loss where all the profit is in the residential above it (and for code acceptance).
- AtlasBarfed 2y agoThey should just make them into storage units
- lotsofpulp 2y agoThis is not true. Lenders are not stupid, they are not going to be fooled by giving away 11 months free and charging a higher rent for 1 month. Or for giving away 1 month and charging a higher rent for 11 months. Commercial real estate loans will have a provision to periodically analyze the property’s revenue (not just monthly sticker price). See debt service coverage ratios. https://www.investopedia.com/terms/d/dscr.asp https://www.investopedia.com/terms/d/dscr.asp
- kurthr 2y agoIt's not about fooling. It's about the contract. The property can have met the debt service (cash flow) ratio, but still be in violation of the the rental price covenant. Those covenants require immediate repayment of the loan.