Friend wants to borrow money, owns lots of RE

[Jeff S.]

Just had breakfast with an old friend (high school) who has 13 houses, bare commercial land and back taxes.

He is negative cash flow but always borrowed his way out of jams with his equity.

He is foreclosure close with his property taxes and wants to borrow, pay 9%, to pay 1 year to keep from foreclosure.

I told him I would consider buying his tax liens on his free and clear commercial property. Just didn't quite know what else to say.

What would you do? What would you say? Is loaning money to a friend ever a good idea? Ever have it work out well?

[Jon Holdman]

Why doesn't he sell something?

Are you willing to have your friendship be destroyed? If you say "no" he may be pissed for a while, but, if he's really a friend, will get over it. If he ends up losing some of this property and blames you, then he's not much of a friend. If you lend the money and he pays it back, great. But if not, then what? Do you foreclose? Can you even foreclose or are there so many liens in front of you that its not worth your while?

Bare commercial land doesn't have much value. Its almost certainly not worth what he thinks it is. If there really is some value, he should sell it. He's over his head. He's mortgaged to the hilt, can't pay taxes, is case flow negative, and (apparently) doesn't have the income to support this albatross. If there really is equity, its a classic case of "you can't eat equity". He needs to sell something.