Know When to fold them?

by Paddy
(Phila)

In this market, what would you suggest, when your loan out performs your development?

The project is in the red, all equity has been lost and the interest payments keep coming in ... Workout doest seem to be working?


Hi Paddy,


I am sorry about the delay but I have been touring with my workshop since February and it takes me a good week after each one to get back to normal before I am off again.

You don'y need me to tell you that what you describe is the "rock and the hard place."

In all my development teaching, if you ask anyone what I lay the biggest emphasis on they would say "research."

Research is the work you do to not be caught out - to always be aware of the changing economic situation that allows you to forecast bad or good times and take corrective action.

When all equity is gone and interest is adding up debt I would bite the bullet and stop the bleeding of cash from your reserves.

Now only you know your current financial ability, but by selling 'at best' now you are stopping the interest debt increasing and that is good.

After that, you have at least 'fixed' your debt to be a known amount and refinance that debt within your current assets.

One other option I would have looked at some time ago, is to find an equity partner who was not looking for a monthly cash flow income NOW and would wait to share in the profits when the development was completed.

If there is still time to investigate this I would.

Hope this helps you.

Colm Dillon