Question:
The possibility of an investment was just presented to me, by me lending $100,000 for 9 month, 14% interest, to a private person who is in process of finishing building 7000 sq feet acreage house in Calgary. Appraised house value is now at $3,300,000. I was explained that the loan would be personally guaranteed and by the company which owner has. Any advice? What is the value of such guaranties? We all know the values for houses in Calgary goes down, these days.
Answer: Tuesday, July 29, 2008
Usually the rate of interest signifies the risk of default. Obviously the bank would not lend any more money. Besides his personal guarantee, where do you stand in line in case of sale or foreclosure? What value would secure your loan once all the other creditors have been paid? I'd put my money into stock market and by the bank which will likely make money on the mortgage on this house.Thanks for asking.
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