Lately, there have been a number of inquiries about investing in real estate.  Even though there is some frothy-ness going around, be careful!

Below is an extreme example, but demonstrates how quick, and how bad, a deal can go wrong for a participant, in this case the hard-money lender who thought he had equity built in.

17215 Camino de Montecillo, Fairbanks

12 br/10 ba 16,636 sf

YB: 1993, 1.88-acre lot on lake

SP: $6,450,000  8/29/06

Opening Bid: $5,000,000 8/08 back to bene

Sale Price: $3,200,000


The lender ended up losing around two million dollars, and the new buyer has to spend another $1,000,000 in repairs.  The scary part is that the original mortgage that recorded the same day as purchase was $7,125,000, and it looks like in 2007 the owner paid down and refinanced at $4,650,000 – but could it have been a second mortgage?  Just a year later it unravels, and lender forecloses.

If you are thinking of buying at a trustee sale, buying a fixer, or “stealing one from the bank”, watch yourself – things can go wrong, very wrong.  Assume that there is no “built-in equity” and what seems like a simple repair job usually costs double.

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