Manhattan Real Estate and Bankruptcy Lessons Learned: Dont Bite Off More than You Can Chew
A very short post today. I wanted to point out the reason that this country is going through the crisis it is right now.
I was in Bankruptcy Court in Brooklyn this past week and a few people came up before my clients and were questioned about any real estate that they owned in Brooklyn:
- One woman, who needed an interpreter, stated that she made approximately $20,000 a year gross income as a housekeeper and had a house with a mortgage of approximately $750,000.00. I would ask that you take a moment and read that again. She also never, NEVER, made more than $30,000 in a year. Asked how she was planning on paying for a mortgage that costs, on a monthly basis, what she earned every three months in salary, she stated “I didn’t really know, I thought maybe my sister would move in with me.” The house will now end up in foreclosure.
- Another couple, also using a translator, bought a 3 family home in Brooklyn. They received rental income on the home, but decided not to pay the mortgage. They used the income to pay their other bills. The combined income was somewhere around $50,000.00 for a home that was worth approximately half a million dollars. The home will likely end up in foreclosure and the tenants, who are likely unaware of these proceedings, will be left without a place to live.
- A third individual had 2 properties in Brooklyn, but sold one and dispensed all the proceeds he had to his several children, for them to buy homes in Brooklyn. Meanwhile, after refinancing his own home, he was unable to make the higher monthly payments after he cashed out. Again, the home will likely go into foreclosure.
This is a small sample of the cases that were heard. Many of the individuals that file have legitimate credit problems stemming from sudden unemployment, a death in the family, or medical issues. However, you cannot help but think about the individuals who took out mortgages like the ones above without ever thinking about how they would repay the debt.