In May 2008, Roberto Charvel saw an opportunity to purchase residential property in his hometown of Mexico City. The building is located at 510 Seneca in Polanco, a luxury urban neighborhood in the city. Built in 1954, the purchase price of this five-story, nine-unit residential building is estimated at 14.7 million Mexican dollars. In addition to the purchase of the property, renovations are planned due to the dilapidation and poor maintenance of the building. The planned purchase would take place during a period of economic crisis and financial uncertainty. The acquisition of the 510 Seneca building is not expected to proceed due to the economic and financial crisis of 2008. At the time of purchase, the building's valuation is overvalued due to questionable income stability, renovations necessary and uncertain future occupancy plans. Say no to plagiarism. Get a Custom Essay on “Why Violent Video Games Should Not Be Banned”?Get the original essayThe acquisition of 510 Seneca will not be financially beneficial at its current valuation due to the housing market collapse that occurred in 2007 In short, the US real estate market, where prices are high, began to take a sharp turn in 2007. The impact of real estate prices in 2007 quickly spread to Europe and the world. The crisis continued to imperil financial institutions and banks in 2008. Mexico and the United States maintain strong economic, political, and social ties, making Mexico vulnerable to fluctuations in the U.S. economy. While mortgage lending has increased in Mexico since the 1994-1995 financial crisis, 2007 marked the start of a period when many foreign banks declared bankruptcy. This is not a good indication for taking out a loan or investing in the real estate market, even if the loan is not from a foreign bank. After renovations, the building may struggle to generate profits due to financially unstable and inconsistent tenants, and falling prices in the real estate market. All apartments consist of three bedrooms and two bathrooms, ranging from 190 to 200 m². The safe, urban lifestyle means Charvel should expect many renters to be younger families or recent graduates working in the area (an older couple is also likely to be looking at the area). Renting apartments on an annual basis, especially to young people, is risky. Charvel should expect a higher turnover rate. Younger tenants are less likely to sign a lease after one year. They are constantly changing career paths. The higher turnover would force it to frequently modernize the apartments to remain attractive to new tenants. Owning the property also carries the risk of tenants falling behind on rent. Tenants' financial stability is of even greater concern due to the economic downturn. If Charvel decides to help eliminate the risk by resorting to monthly rent payment by credit card, he will have to increase the rent to supplement the credit card fees. The demand for these premises would decrease due to the increase in rents. With the housing crisis, the option of selling homes doesn't seem much better. Charvel may have to drop the price significantly to sell the units. This could cause him to lose credibility with investors and his bank. The time and capital invested in property logically does not seem profitable. Renovations to the property are too expensive given the price of the building. They are estimated at around 43% of costs.