5% fixed for 30 years. A strange, unknown hard money lender offers you 55% LTV at 14% for two years. Which one is the con man? I hope by now you will immediately say the first offer.
But be very careful of the lightning fast loan commitment at outrageous rates based on 50% of “quick sale value.” What the heck is quick sale value? There is no enforceable definition in the law.
The lender will charge you a $200,000 commitment fee for a $10 million commercial loan, as long as the loan does not exceed 50% of quick sale value.
When the appraiser goes out, he values your $20 million resort at just $7 million on a quick sale basis. 5 million loan, when you owe $7 million. When you decline it, the lender keeps your $200,000 deposit and blames you for over-valuing your property.
The Chinese people distrust banks for historical reasons. They therefore keep much of their savings in real estate. Usually they buy apartments (think of condo’s) that neither they, nor any renters, will ever occupy – at least not for a decade or two.
These apartments are often unfinished. They have rough electrical and rough plumbing, but these apartments often don’t even have interior walls, finished electrical, finished plumbing, or floor coverings.
One lender offers you 80% LTV at 3
Surprisingly, there are no real estate taxes in China, so the cost of ownership is low, other than the mortgage. Paying down on the mortgage, like the funding of an IRA, is how the Chinese people save. Most of the savings of the Chinese middle class is in the form of these extra 50 million to 65 million vacant apartments. Continue reading “Economics: A Tidal Wave of Economic Poop May Be Coming From China”