From a financial perspective? We saved them from total collapse. From a human perspective? I left this meeting completely broken • Yaakov Reinitz, real estate consultant, with a heartbreaking story about a priest and a seminary teacher who lost their home
They sat across from me last week, and my heart just broke. He is a benefactor, who is completely absorbed in Torah study, and she is a seminary teacher. They have ten children at home without the evil eye, and they came to me with a heartbreaking story about investing in real estate.
Until two years ago, they had their own apartment, without a single shekel of mortgage. The parents on both sides gave it to them at the beginning, when they first got married. In my opinion, this was a strategic mistake, but that's really not the story right now. The bottom line is that they lived in peace and quiet, without any worries.
Until one day, two years ago, a middleman came to them. A crook. There's no other word to describe him.
He smelled their innocence and sold them a rosy dream in the north. An apartment on paper worth 2.7 million shekels. When they explained to him, with simple logic, that they didn't have a single shekel of free equity, he blindly sent them to mortgage their current apartment in order to obtain the first 10% that the contractor demanded.
""You have money in the walls," he whispered in their ear.
To add insult to injury, this broker also took 130,000 shekels in brokerage fees from them, which of course was also swallowed up in that miserable mortgage.
""Don't worry," the realtor solemnly promised. "Within two years, this apartment will be worth a million shekels more. At most, you'll sell it on and make a huge profit.".
So he promised. In reality, the market in the north froze.
Now we've reached the occupancy stage, and the balloon has burst in their face just as the contractor is demanding the money. They don't have a penny to complete the deal. They tried to sell the apartment on the open market. The result? Even below the original price they paid, not a soul wants to buy. There are simply no buyers. The contractor, by the way, is stuck in a project with a large inventory of unsold apartments.
Economic downturn
We put the numbers on the board in my office. The options they faced were not glamorous, to say the least. Or they mortgage both properties together and enter into an insane monthly repayment of 16,000 shekels a month, when the apartment in the north will bring them maybe 6,000 shekels in rent at best.
Where exactly will Avrech and Moreh bring in a monthly flow of another 10,000 NIS each month? The second option was to cancel the contract, take all the violation fines (15%!) and the crazy attachments from the contractor, and just earn the exemption from the purchase tax.
No matter how you spin it, without professional intervention, this couple would have entered a complete financial spiral, leaving behind debts and losses of over 600,000 shekels.
I brought another professional into the case, and we turned over every stone during long hours of discussions. In the end, we came to the most correct economic conclusion that would get them out of the hole, but it was also the cruelest one: they must sell their apartment now, complete the deal in the north without becoming enslaved by debt, live in a rental for the next 5-6 years, then sell the property in the north and buy a new apartment in their original city.
From a dry economic perspective? We saved them from total collapse. From a human perspective? I left this meeting completely broken.
Easy prey
Think for yourself what it's like to look a couple of parents in the eyes and tell them: "You have no choice, you have to sell your house." They lived there their entire lives! They built their house there, raised their children there. Now, precisely at the most sensitive time, when the older children arrive at the Man of the Temple section, they have to pack their entire lives in cartons, leave the familiar neighborhood and move into a rented apartment. It's hard, emotionally and physically, on levels that can't even be explained in words.
But there was no other choice. Economic reality does not spare mistakes.
The message is clear and concise: Don't be the next in line to sit in my office crying and in tears. The crooks and vested interests outside smell a lack of understanding from afar and are looking for easy prey on your back.
Take for yourself an iron rule for life, and pass it on: Professional and objective advice is taken and paid for before you sign the contract, not after the financial rope is already tightly wrapped around your neck.
• Yaakov Reinitz is a real estate consultant and lecturer. To schedule a consultation - Click here
