Mortgage question regarding commercial property....
I was wondering I got a commercial property for sale...no mortgage .....I got a buyer for the property and hes going to put %25 down and I would provide the mortgage since its almost impossible for hiim to go the normal financing route since his future income be tied into buying this property and operating it.What kind of precautions should I take just in case he defaults.Should I carry any sort of insurance?.....how many payments can he legally be late before I take action against him?.....
Hire a big italian dude with a bat to make sure he pays on time.
Once you start accepting late payments you can't take action against him. It's called equitable estoppel.
you need to go to a lawyer. a good one. and get the deal set up through him. there is nothing any one else here can say that will help you unless they are a real estate lawyer and doing the deal for you.
I dont know a whole lot for commercial mortgages, though i m assuming similar things will apply:
- insurance on the property.... e.g. if the place burns down... The owner should pay for that and it should be mandatory before financing it to him.
- how will it be financed? how are you calculating interest? how is he going to pay you? if he defaults on payments how will that impact you?
- if he damages the property and defaults will his insurance cover it?
- how many years will it take him to pay off the mortgage to you?
- are you going to give him the ability to pay it all out at any time?
- can he sell it before he is done paying the mortgage to you?
- have you looked over his business plan/proposition? is it a viable long term business?
- where is his down payment coming from? is it laundered money? how will it impact you for accepting it?
- if things get tough for him will you allow him to re-negotiate the terms of the mortgage with you?
- if rates in the market change will you change them on him/can he renegotiate the terms of the mortgage with you/ the interest rate?
- Are you prepared to go into a legal battle if he defaults to get your property back?
Sirex thanks for the tips..
2)fix rate open mortage
3) Hes %100 responsible for upkeep of the property and business
4) Hes allowed to pay it all off without penalty (better for me to get a lump sum)
5) He can sell anytime ...
6) He sold his previous business so all is legit to get the downpayment..
7) I be flexible on terms.
8) My lawyer would word the contract so if he defaults I be %100 secured.
He ran a business like the one Im selling to him before,but the area where his business was located depended on a large company that closed up and went to the states...over 500 workers terminated and the small town hasnt recovered from it.
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