Dave Knudson, Gravity Capital. Today I would say this video will be geared towards new investors and lenders. And the topic is, this is a four letter word for lenders, Bankruptcy. I hope I spelled that right, I should because I hate that word.

So, we had a loan with 50 lots roughly in Lafayette, Louisiana. We had a borrower who tried for a year and a half now to try to build some homes. He could never do it. He was always short on money, he would never do what he said he was going to do. Basically, the deal fell apart, but we still like the dude.

So, what happened, we had a foreclosure set up, he was scheduled for tomorrow, April 25th. The day before the sale the guy went bankrupt and stopped the foreclosure. Now, just keep in mind that this may be a delay of anywhere between three to six months and possibly up to a year depending on how involved he gets. 

Keep in mind that our interest rate will still keep ticking, and we will have some more attorney fees. But as long as you are at 50% loan to value, you should be okay and we believe we are on this one. So we lent him about $650,000 and he is up to about 1.2 million dollars now. I think the property is still worth maybe $2 million when it’s done, we gotta put some infrastructure in but it still be a good deal. 

Don’t let a bankruptcy ruin your day, but keep in mind that it is probably the biggest downside in this business.

Find more of Dave’s videos here.