Is project ownership financeable?

How does the obligation to make additional contributions actually work? Assuming I build a portfolio and only enter with the minimum amount of equity. When does the bank come knocking if the real estate market crashes? I also assume that the stock market will collapse due to the interest rate increase as a trigger. That is probably the biggest risk from my point of view. As long as fresh money keeps coming in – topic unemployment.

How does the margin call obligation actually work? Given the case that I build a portfolio and only go in with the minimum amount of equity. At what point does the bank come knocking if the real estate market crashes? I also assume that the stock market will collapse due to the interest rate increase as a trigger. That is probably the biggest risk from my point of view. As long as fresh money keeps coming in – topic unemployment.

That may depend on the loan agreement. Maybe knows more about that.

How does the additional payment obligation actually work?

I’m not exactly sure what you mean. As I know it, you first have to use up your equity for the purchase, construction, etc. So only the specified part of the equity that you voluntarily want to contribute, not the reserve kept in the background. After that, there is the money from the bank. Exactly as much as agreed upon. I wouldn’t know why you would then have to add more equity to the bank. You only have to add equity if you spend more money than planned, but then the money goes to those from whom you bought: forgotten cost points, price increases, special requests, etc.

When does the bank come knocking if the real estate market crashes?

No one comes knocking. As soon as you have signed a contract, the contract stands unchanged. Whether the market crashes... doesn’t matter. You get the agreed money and you pay the agreed amount. The same applies if prices skyrocket. You only get the agreed amount. Just a contract. The bank only comes knocking if you no longer pay your monthly installment. How you pay it is your problem: salary or reserves in case of unemployment.

I had assumed that my property counts as collateral for the bank. And if the market value were to collapse massively & the property as collateral is no longer sufficient, the bank would demand a sum-X from me.

Well, he probably means what happens when property prices collapse and with them the loan-to-value ratios. See the USA during the subprime crisis. If I look at the course of the thread, you can already guess what kind of nonsense the cheap construction interest rates are causing.

I had assumed that my property counts as collateral for the bank. And if the market value collapses massively & the property as collateral is no longer sufficient, the bank demands an amount-X from me.

Simply put: External shock e.g. crisis in the Middle East -> oil price shock -> economic crisis -> your invested money in the "stock market" is only worth a fraction -> demand for real estate collapses -> price correction -> game over Therefore, 100 + x financings have a risk premium