How to buy a building with bad debt

[Jay Ben]

I found a 100 unit deal at a cheap price per door but when I saw the T 12 the bad debt gets larger every single month… The last month the bad debt was 25% of the income. What would you do in that situation in today’s market?

[Charles Seaman]

@Jay Ben If purchased at the right price, those deals can present great opportunities assuming that the property isn't located in a bad area.  It's important to realize that property values are rapidly falling in many areas right now, so you need to make sure that you're getting a good price for the amount of risk that you're taking on.

It's very important to understand the cause of the bad debt. If it's simply mismanagement, then it could be a fairly easy fix (albeit one that will take time and perhaps some CapEx dollars). If it's due to the area that the property is located in, then stay away from it regardless of the price.