What happens when your loan is becoming due and your lease is running out ?
 

Say you bought a building with a loan

the building comes with single tenant, 10 year lease

so the banks agrees to

25 yr amortization,  10 years of payment ( the term of the lease )

what happens when you reach your 10 year ? and cannot afford the balloon payment ?

1. you  try to sell your commercial building with (1 year lease )  ?  so the  only buyers are cash payers since how would a buyer get financing for  single tenant building with 1 year lease left?
2. you have to try to resign the tenant before the expiring dates ?

what happens and what solution does the owner have in this situation ?

is it better to sell this thing before you approach end of loan life ?

thanks
[{"id": "g5m0497", "text": "You see if your tenant wants to renew or exercise their option to renew if they have options left. If not you have a leasing agent sign a new tenant. Once you have another long term lease in place you can sell.", "replies": [{"id": "g5mtva2", "text": "Also, tenant notice periods are key on single tenant properties.", "replies": [], "depth": 2}, {"id": "g5n6smy", "text": "If you have a new tenant to replace you can then also consider refinancing with a new loan", "replies": [], "depth": 2}], "depth": 1}, {"id": "g5m189v", "text": "Typically a tenant and landlord will negotiate a new term or exercise an existing option 6 months before the term expires and then the landlord can re-finance.", "replies": [], "depth": 1}, {"id": "g5m21h9", "text": "You have boiled it down too much.  It is much more dynamic than this.\n\nOne of the first steps you will want to do is to see if the tenant will want to utilize their option to renew their lease, if it is in the lease, or talk to the tenant if they want to sign an extension/new lease.  If they don't and they end up wanting to vacate the property, you will need to find a new tenant.\n\nAs the for loan aspect of it, the loan can be refinanced or the property can be sold, with tenant in place for most desirable terms.  Yes the balloon payment is due at the end of 10 years, but the balloon payment can be made with a new loan or refinanced with the current lender.  With a loan coming due like that, the lender (if they are good and assuming the property has performed well) will give the owner a call to see if they want to refinance.", "replies": [{"id": "g5m5b9q", "text": "thanks for your response,\n\nin commercial market how long do you know before tenant decides to leave or stay ?\n\n\nI can borrow money to pay the balloon payment using empty property as collateral, do banks allow this ?", "replies": [{"id": "g5m6ed1", "text": "It will usually say in the lease when they need to give you an answer.  Typically 90-180 days in advance of lease term is up.  Talks on renewal can and should happen earlier.  \n\n&amp;#x200B;\n\nAnd yes.  You can absolutely refinance your current loan when it is coming due.  That is what keeps me in a job is the commercial refinance market.  Typically you will only see life insurance companies with fully amortizing loans(with rate resets) or agency lenders(Fannie or Freddie) will fix the rate for 30 years for multifamily.  You will pay for that in rate though.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "g5mfscd", "text": "Is this a purely hypothetical question? If not, let us know how it comes out.", "replies": [], "depth": 1}, {"id": "g5nzx2e", "text": "I am in a similar situation, I talked to my bank, they told they are not into building management,  so they will do a new loan, if it comes to that point. So talk to your lender. Good luck!", "replies": [], "depth": 1}]