A fractured condo is a residential condominium complex where some of the units were sold as condo's, but the bulk of the units remain unsold and are rented out as apartments.  Typically the rental units are put in a rental pool that is run by a large management company.

Fractured condo's have a lot of problems because renters don't treat the property with the same level of care as the owners.  In addition, renters are often younger, louder and more raucous.

In most cases, because of the by-laws of the development, the management of the homeowners association remains in the control of the original developer, despite the fact that he might own less than 50% of the units.  If the developer declares that his unsold units are no longer for sale, he may lose control of the homeowners association.  On the other hand, if the developer keeps his units for sale, a REIT cannot finance the unsold (fractured) condo units because a REIT may not legally finance any property that is for sale.

One of the largest problems for fractured condo's is that most developers, in order to sell their condo's, often set their initial homeowners association dues artificially low.  Therefore the homeowners association starts out underfunded.

A few bridge loan lenders will finance fractured condo's at LIBOR plus 3.5% to 4.0%.  They will underwrite the deal to a breakeven cash flow, which unfortunately will only be about 60% of the cost of the condo's.  Someone will have to take a very painful haircut.

You can apply to scores of lenders for a commercial real estate loan on a fractured condo's by applying for a first mortgage bridge loan from C-Loans.com on a residential condo project.