I was told yesterday about a restauant here in Portland that doesn't pay its bills, putting the landlord in a doubly tough spot: he'd previously run and closed a restaurant at the location, and is carrying the paper for the new tenant. Meaning, he lost his shirt on his own venture, and is now losing it with someone else's. This made me think it's never a good idea to carry the paper (translation: you keep paying the bank loan, the new tenant pays you). I've had some experience here. A friend and I once bought a cabin at Big Bear Lake, for which the owners carried the paper, which they well had to: my friend and I were young and broke, with little kids to support, and while our monthly payment was low, around $540 a month, one or the other of us was inevitably late, spurring frantic phone calls from the wife of the couple, saying her husband was out of work, they needed the money, they needed the money now! We wound up selling the cabin at a loss (the only two people, I believe, ever to have lost money on California real estate pre-2007).
My husband and I were house-hunting recently, more dreaming really, and saw two fantastic mid-century modern homes in an area of Portland we are now calling SSN, for suoper secret neighborhood. Both homes had amazing views, more room than we could ever use (6,000 square feet and 4,800, respectively) and the sorts of bonuses that just make you laugh, i.e., a full indoor basketball court. The larger of the homes was priced to sell. It belonged to a young couple and their kids and they were on the move; it was something like $600,000. The smaller house was owned by a retired couple; they'd moved to Lake Oswego. They'd moved out of the house, which they'd built themselves, in which they'd raised their family, several years before. They liked talking to us, on the phone, about all the details, all the work, all the dreams. Also, they would carry the paper. For about two minutes, my husband and I fantasized that we would be those people who lucked into the great deal, the equivalent of buying the 1958 Mercedes that had only been driven a mile to church on Sundays, and which we could have for a song.
Dream on.
The price of emotional attachment + real estate? $980,000.
Which leads me to conclude, it is never a good idea, for either party, to let the paper be carried. You're either entering into a situation where one party cannot pay, or the other cannot let go.
