Questions about being the lender on a secured loan..??
Investor · Pensacola, FL · Member since 2017 · 50 posts · 21 votes
Questions about being the lender on a secured loan..??
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Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes
3yThey want unsecured money. Daughter wearing Dad's button down shirt in photo and projects they list not completed. They have planning dept conditional use permit hearings postponed and lot split permits requested but not done, listed on website as done.
Call investors included as limited partners and see if they recommend. You won't be a limited partner.
Without un related (verified not family) recommendations may as well invest in FTX.
"EMBRY DEVELOPMENT COMPANY, LLC (E.E. Beavers Family
Partnership, L.P. and Estate of Edgar C. Long, owners) requesting rezoning
from GC and PSC to RM-8 for the purpose of Townhouses in Land Lots 35
and 36 of the 18th District, and Land lot 1297 of the 19th District. Located on
the northwest side of Old Bankhead Highway, south side of Veterans
Memorial Highway, east of Old Powder Springs Road (1140 Old Bankhead
Highway). (Previously continued by the Planning Commission (PC) until
the March 5, 2019,"
34 Replies
- 3yJacob St. MartinPro MemberInvestor · Charlottesville Virginia · Member since 2021 · 348 posts · 346 votes
Hello Andrew, I am definitely not an expert in this field so you will definitely want the opinions of others, but I did have a thought.
I have heard that for new construction the financing often comes in installments. Basically you will give them money to complete the first layer of work then they will do it and now you have that as collateral and move on to the next phase. This protects you with increasing collateral as they do work and minimizes your loses if they default.
- Real Estate Coach · Riverside County, CA · Member since 2017 · 238 posts · 157 votes3y
@Andrew Angell
Hi. Quit claim deed? So you own the land/property? Or do you mean a deed of trust to secure the loan.
The deed of trust secures you’d loan against the land/property. Based on missed payments would allow you to foreclosure on the loan yes. But I’m not sure what you mean by quit claim deed. That’s an assignment of ownership rather than to do with the loan.
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes3y
@Andrew Angell
1. Are you sure it’s 10% over 3 months which is very diferrent than 10% interest (which is usuallly amortized over a year) with a balloon at 3 months?
2. If you are lending it better be a warranty deed and you want a lenders title policy
3. You also want a personal guarantee so if they default you can go after any of their personal assets because you are correct, you would end up with vacant land
The land should be worth atleast 40k if you are lending $27k.
7e investments53 Reviews - Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes3y
@Andrew Angell A quitclaim deed does not "Secure" a loan. Are YOU getting a quitclaim deed? Why? If they are acquiring the property via a quit claim deed that could be a risk to you.
A mortgage or deed of trust makes a property collateral for a loan.
If you have to foreclose, you would be foreclosing on whatever property is pledged as collateral for the loan. The property or properties would depend on how the specific documents are written up.
- 3yTom GimerBusiness MemberDMV · Member since 2017 · 3k+ posts · 3k+ votes
@Andrew Angell That would be 40% per annum and with a quitclaim deed as security your investment in 3 months would imo yield a $25,000 loss. Post the name of the “vendor” so they can be added to the title insurer red flag email blast.
Gimer Law516 Reviews - Investor · Pensacola, FL · Member since 2017 · 50 posts · 21 votes3yThanks for the feedback. I'm trying to get some clarification from these guys if that's how it works or what the details are. I'll follow up accordingly.
Quote from @Jacob St. Martin:
Hello Andrew, I am definitely not an expert in this field so you will definitely want the opinions of others, but I did have a thought.
I have heard that for new construction the financing often comes in installments. Basically you will give them money to complete the first layer of work then they will do it and now you have that as collateral and move on to the next phase. This protects you with increasing collateral as they do work and minimizes your loses if they default.
- Investor · Pensacola, FL · Member since 2017 · 50 posts · 21 votes3yThat's why I'm a little bit confused. Their documentation shows the following:
Quote from @John Slater:
@Andrew Angell
Hi. Quit claim deed? So you own the land/property? Or do you mean a deed of trust to secure the loan.
The deed of trust secures you’d loan against the land/property. Based on missed payments would allow you to foreclosure on the loan yes. But I’m not sure what you mean by quit claim deed. That’s an assignment of ownership rather than to do with the loan.
1. Promissory Note
2. Quitclaim Deed
But it's not for any specific property. It's just for them to build out the whole neighborhood. So yeah, I'm not sure how a quitclaim deed applies here, which is what I'm trying to figure out. I'll get some clarification from them on this and follow up. - Investor · Pensacola, FL · Member since 2017 · 50 posts · 21 votes3y
Quote from @Chris Seveney:
@Andrew Angell
1. Are you sure it’s 10% over 3 months which is very diferrent than 10% interest (which is usuallly amortized over a year) with a balloon at 3 months?
2. If you are lending it better be a warranty deed and you want a lenders title policy
3. You also want a personal guarantee so if they default you can go after any of their personal assets because you are correct, you would end up with vacant land
The land should be worth atleast 40k if you are lending $27k.
1. Yeah, I actually gave them a break-down of what I was expecting based on a 10% API where I divided by 12, and then multiplied by 3. They said no, it's actually a full 10% in only that 3 month term. So if I give them $25k I would get back $27,500 in 3 months. So that would be a 40% APR, which is where I'm getting a bit of that "too good to be true" vibe. The developer has been in business 60 years, though, and there's a custodian that oversees these loans whose entity has been active since 2014, so they seem legit in that sense.
2. All they're showing is "Promissory Note" and "Quitclaim" deed, so yeah, I'm confused how that would apply to a portfolio as opposed to an individual parcel. Trying to get clarification on that from them (so that I can verify again with an attorney.)
3. Yeah, the personal guarantee is what I feel this is missing, and I worry they could just shuffle assets to other LLCs and give us empty land, or even an empty portfolio entirely. Even if they give the land, though, if it's only worth $40k and there are lots of lenders trying to get paid back from it that would become a problem.
I'm going to get more specifics from these guys and I'll follow up.
- Investor · Pensacola, FL · Member since 2017 · 50 posts · 21 votes3y
Quote from @Ned Carey:
@Andrew Angell A quitclaim deed does not "Secure" a loan. Are YOU getting a quitclaim deed? Why? If they are acquiring the property via a quit claim deed that could be a risk to you.
A mortgage or deed of trust makes a property collateral for a loan.
If you have to foreclose, you would be foreclosing on whatever property is pledged as collateral for the loan. The property or properties would depend on how the specific documents are written up.
The way they're wording it is that I would get a promissory note and a quitclaim deed, and that secures the loan with the real estate behind it.
I've been asking about how that actually works as opposed to having a mortgage and deed of trust, but they just keep saying there is no lien on any property because we're simply loaning them cash to build out the neighborhood, and if they default there is a custodian that would take over and has the power to refinance, sell assets, etc. to pay back lenders if they default.
The developer seems to have been in business for 60 years, and the custodian business entity has been active and good standing since 2014. I'm still digging deeper into the history of both.EDIT: Just posted a screenshot in my last reply in this thread where it clarifies the Quitclaim deed. Apparently they are giving me a secured promissory note with a copy of their quitclaim deed proving ownership of the asset..??
- Investor · Pensacola, FL · Member since 2017 · 50 posts · 21 votes3y
Quote from @Tom Gimer:
@Andrew Angell That would be 40% per annum and with a quitclaim deed as security your investment in 3 months would imo yield a $25,000 loss. Post the name of the “vendor” so they can be added to the title insurer red flag email blast.
I have 4 similar deals like I'm analyzing right now. I wanted to create a thread simply asking if anybody has worked with any of them, and what they know about them and these types of structures. I was worried that would look like an ad/spam.
I'll go ahead and specify this one here, though. The developer is Embry Development Corp (https://embrydevelopmentcorp.c...) and the custodian is Drive Planning (https://driveplanning.com/).
I guess this answers the Quitclaim deed question right there...I overlooked that before. So it says they're just providing a copy of their Quitclaim deed showing they own the property that they're using as collateral, apparently, and would give me a promissory note with that property backing it..?? - Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes3y
They want unsecured money. Daughter wearing Dad's button down shirt in photo and projects they list not completed. They have planning dept conditional use permit hearings postponed and lot split permits requested but not done, listed on website as done.
Call investors included as limited partners and see if they recommend. You won't be a limited partner.
Without un related (verified not family) recommendations may as well invest in FTX.
"EMBRY DEVELOPMENT COMPANY, LLC (E.E. Beavers Family
Partnership, L.P. and Estate of Edgar C. Long, owners) requesting rezoning
from GC and PSC to RM-8 for the purpose of Townhouses in Land Lots 35
and 36 of the 18th District, and Land lot 1297 of the 19th District. Located on
the northwest side of Old Bankhead Highway, south side of Veterans
Memorial Highway, east of Old Powder Springs Road (1140 Old Bankhead
Highway). (Previously continued by the Planning Commission (PC) until
the March 5, 2019," - 3yTom GimerBusiness MemberDMV · Member since 2017 · 3k+ posts · 3k+ votes
@Andrew Angell They've been in business for 60 years and yet just registered the domain name in 2020? And the phone number is a wireless registered to James Embry who is not even a member of the Leadership team? Run away from this "investment".
Gimer Law516 Reviews - 3yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Tom Gimer:
@Andrew Angell They've been in business for 60 years and yet just registered the domain name in 2020? And the phone number is a wireless registered to James Embry who is not even a member of the Leadership team? Run away from this "investment".
@Caroline Gerardo nailed it unsecrured not for operating money or equity they need for senior lender. Quit claim is many times given in advance on HML so the lender does not have to foreclose however In most states event though lenders do this its not legal.. And would not hold up if challenged. Keep in mind when the quit claim is given to you and dated etc you now own whatever property is described in the QCD does not have to be recorded to be valid. this is a feel good document.
But that all said this is simply and unsecured loan to a building company . big red flag to me is the 3 months no one builds and sells in 3 months so its just operating capital in my mind.
the other big question what property are they quit claiming to you. a particular lot ??? is there debt on the lot ?? did they just quit claim a half built house to you with a construction loan attached which for sure would be a event of default to their senior lender.
there is simply no security here they are taking advantage of those with out much or any lending experince and then holding the carrot out there.. for me to do this deal I would want at least 10k return on my 25k..
- 3yJay ThomasPro MemberReal Estate Agent · Houston, TX · Member since 2021 · 1k+ posts · 715 votes
It is important to be aware of the risks associated with acquiring a property via a quitclaim deed. Without the security of a mortgage or deed of trust, you do not have the protection and assurance that your loan will be secured in the event of foreclosure. Make sure that all parties involved understand these implications before signing any documents. It could potentially lead to costly mistakes down the line if not properly addressed now.
- Investor · Pensacola, FL · Member since 2017 · 50 posts · 21 votes3y
Quote from @Caroline Gerardo:
They want unsecured money. Daughter wearing Dad's button down shirt in photo and projects they list not completed. They have planning dept conditional use permit hearings postponed and lot split permits requested but not done, listed on website as done.
Call investors included as limited partners and see if they recommend. You won't be a limited partner.
Without un related (verified not family) recommendations may as well invest in FTX.
"EMBRY DEVELOPMENT COMPANY, LLC (E.E. Beavers Family
Partnership, L.P. and Estate of Edgar C. Long, owners) requesting rezoning
from GC and PSC to RM-8 for the purpose of Townhouses in Land Lots 35
and 36 of the 18th District, and Land lot 1297 of the 19th District. Located on
the northwest side of Old Bankhead Highway, south side of Veterans
Memorial Highway, east of Old Powder Springs Road (1140 Old Bankhead
Highway). (Previously continued by the Planning Commission (PC) until
the March 5, 2019,"Yeah, interesting feedback, thanks.
The person that referred me to these deals is a CPA that is not part of their family, and claims they've been lending to them for a few years. But yeah, seems like a lot of red flags and we haven't even dug that deep yet.
- Investor · Pensacola, FL · Member since 2017 · 50 posts · 21 votes3y
Quote from @Jay Hinrichs:
Quote from @Tom Gimer:
@Andrew Angell They've been in business for 60 years and yet just registered the domain name in 2020? And the phone number is a wireless registered to James Embry who is not even a member of the Leadership team? Run away from this "investment".
@Caroline Gerardo nailed it unsecrured not for operating money or equity they need for senior lender. Quit claim is many times given in advance on HML so the lender does not have to foreclose however In most states event though lenders do this its not legal.. And would not hold up if challenged. Keep in mind when the quit claim is given to you and dated etc you now own whatever property is described in the QCD does not have to be recorded to be valid. this is a feel good document.
But that all said this is simply and unsecured loan to a building company . big red flag to me is the 3 months no one builds and sells in 3 months so its just operating capital in my mind.
the other big question what property are they quit claiming to you. a particular lot ??? is there debt on the lot ?? did they just quit claim a half built house to you with a construction loan attached which for sure would be a event of default to their senior lender.
there is simply no security here they are taking advantage of those with out much or any lending experince and then holding the carrot out there.. for me to do this deal I would want at least 10k return on my 25k..
Thanks for the feedback. I've read the books, but I don't have any direct experience. And yeah, this seems to go against what the books say about being 1st lien holder with a mortgage filed with the county.
Here there is no lien on any single property, and they claim they'll give me a copy of a quitclaim deed proving ownership...but I guess that's only of empty land right now.
Crazy returns promised...
Thanks everybody for helping me solidify my initial thoughts on this. :) - 3yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Andrew Angell:
Quote from @Jay Hinrichs:
Quote from @Tom Gimer:
@Andrew Angell They've been in business for 60 years and yet just registered the domain name in 2020? And the phone number is a wireless registered to James Embry who is not even a member of the Leadership team? Run away from this "investment".
@Caroline Gerardo nailed it unsecrured not for operating money or equity they need for senior lender. Quit claim is many times given in advance on HML so the lender does not have to foreclose however In most states event though lenders do this its not legal.. And would not hold up if challenged. Keep in mind when the quit claim is given to you and dated etc you now own whatever property is described in the QCD does not have to be recorded to be valid. this is a feel good document.
But that all said this is simply and unsecured loan to a building company . big red flag to me is the 3 months no one builds and sells in 3 months so its just operating capital in my mind.
the other big question what property are they quit claiming to you. a particular lot ??? is there debt on the lot ?? did they just quit claim a half built house to you with a construction loan attached which for sure would be a event of default to their senior lender.
there is simply no security here they are taking advantage of those with out much or any lending experince and then holding the carrot out there.. for me to do this deal I would want at least 10k return on my 25k..
Thanks for the feedback. I've read the books, but I don't have any direct experience. And yeah, this seems to go against what the books say about being 1st lien holder with a mortgage filed with the county.
Here there is no lien on any single property, and they claim they'll give me a copy of a quitclaim deed proving ownership...but I guess that's only of empty land right now.
Crazy returns promised...
Thanks everybody for helping me solidify my initial thoughts on this. :)Last thought successful builder would not be looking for 25k investors.. Just sayin.. too much work and trouble for such a small amount.
- Investor · Pensacola, FL · Member since 2017 · 50 posts · 21 votes3y
Quote from @Jay Hinrichs:
Quote from @Andrew Angell:
Quote from @Jay Hinrichs:
Quote from @Tom Gimer:
@Andrew Angell They've been in business for 60 years and yet just registered the domain name in 2020? And the phone number is a wireless registered to James Embry who is not even a member of the Leadership team? Run away from this "investment".
@Caroline Gerardo nailed it unsecrured not for operating money or equity they need for senior lender. Quit claim is many times given in advance on HML so the lender does not have to foreclose however In most states event though lenders do this its not legal.. And would not hold up if challenged. Keep in mind when the quit claim is given to you and dated etc you now own whatever property is described in the QCD does not have to be recorded to be valid. this is a feel good document.
But that all said this is simply and unsecured loan to a building company . big red flag to me is the 3 months no one builds and sells in 3 months so its just operating capital in my mind.
the other big question what property are they quit claiming to you. a particular lot ??? is there debt on the lot ?? did they just quit claim a half built house to you with a construction loan attached which for sure would be a event of default to their senior lender.
there is simply no security here they are taking advantage of those with out much or any lending experince and then holding the carrot out there.. for me to do this deal I would want at least 10k return on my 25k..
Thanks for the feedback. I've read the books, but I don't have any direct experience. And yeah, this seems to go against what the books say about being 1st lien holder with a mortgage filed with the county.
Here there is no lien on any single property, and they claim they'll give me a copy of a quitclaim deed proving ownership...but I guess that's only of empty land right now.
Crazy returns promised...
Thanks everybody for helping me solidify my initial thoughts on this. :)Last thought successful builder would not be looking for 25k investors.. Just sayin.. too much work and trouble for such a small amount.
It's the minimum amount. They actually have lots of options for different terms, rates, etc. $25k is the minimum amount, and the 3 month term is what I was looking at just to see if they'd actually payout as promised before tying up funds for longer terms.
Looking more and more like something I should just avoid, though.
- 3yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Andrew Angell:
Quote from @Jay Hinrichs:
Quote from @Andrew Angell:
Quote from @Jay Hinrichs:
Quote from @Tom Gimer:
@Andrew Angell They've been in business for 60 years and yet just registered the domain name in 2020? And the phone number is a wireless registered to James Embry who is not even a member of the Leadership team? Run away from this "investment".
@Caroline Gerardo nailed it unsecrured not for operating money or equity they need for senior lender. Quit claim is many times given in advance on HML so the lender does not have to foreclose however In most states event though lenders do this its not legal.. And would not hold up if challenged. Keep in mind when the quit claim is given to you and dated etc you now own whatever property is described in the QCD does not have to be recorded to be valid. this is a feel good document.
But that all said this is simply and unsecured loan to a building company . big red flag to me is the 3 months no one builds and sells in 3 months so its just operating capital in my mind.
the other big question what property are they quit claiming to you. a particular lot ??? is there debt on the lot ?? did they just quit claim a half built house to you with a construction loan attached which for sure would be a event of default to their senior lender.
there is simply no security here they are taking advantage of those with out much or any lending experince and then holding the carrot out there.. for me to do this deal I would want at least 10k return on my 25k..
Thanks for the feedback. I've read the books, but I don't have any direct experience. And yeah, this seems to go against what the books say about being 1st lien holder with a mortgage filed with the county.
Here there is no lien on any single property, and they claim they'll give me a copy of a quitclaim deed proving ownership...but I guess that's only of empty land right now.
Crazy returns promised...
Thanks everybody for helping me solidify my initial thoughts on this. :)Last thought successful builder would not be looking for 25k investors.. Just sayin.. too much work and trouble for such a small amount.
It's the minimum amount. They actually have lots of options for different terms, rates, etc. $25k is the minimum amount, and the 3 month term is what I was looking at just to see if they'd actually payout as promised before tying up funds for longer terms.
Looking more and more like something I should just avoid, though.
not necessarily as long as you know exactly what your doing and if U go meet with them and they provide some back up to their financial capacity etc.
higher returns do take more risk although I can tell you as a home builder / developer myself if I was paying 10% for 90 days loans on equity I would go broke. - Investor · Pensacola, FL · Member since 2017 · 50 posts · 21 votes3y
Quote from @Tom Gimer:
@Andrew Angell They've been in business for 60 years and yet just registered the domain name in 2020? And the phone number is a wireless registered to James Embry who is not even a member of the Leadership team? Run away from this "investment".
They do have a different domain on their emails, embrycompanies.com, that was registered in 2000. James Embry is part of their family.
I mean I guess that's the risk here. You're putting it all into this family run developer. I'm going to dig deeper into the Embry family in general just for fun.
- 3yNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
stepping back a bit - just curious - what interests you about this aspect of investing?
- 3yTom GimerBusiness MemberDMV · Member since 2017 · 3k+ posts · 3k+ votes
Quote from @Andrew Angell:
Quote from @Tom Gimer:
@Andrew Angell They've been in business for 60 years and yet just registered the domain name in 2020? And the phone number is a wireless registered to James Embry who is not even a member of the Leadership team? Run away from this "investment".
They do have a different domain on their emails, embrycompanies.com, that was registered in 2000. James Embry is part of their family.
I mean I guess that's the risk here. You're putting it all into this family run developer. I'm going to dig deeper into the Embry family in general just for fun.
OK maybe they turn out to be a legit company. But if they are marketing an opportunity as secured when it isn't... that's a problem. Good luck.
Gimer Law516 Reviews - Investor · Pensacola, FL · Member since 2017 · 50 posts · 21 votes3y
Quote from @Nicholas L.:
stepping back a bit - just curious - what interests you about this aspect of investing?
Cashflow. These deals have options to pay monthly, quarterly or annual interest payments with return of principal at the end of the term.
I'm in a syndication paying 10% monthly payments right now, and I'm liking that a lot, but I'm having trouble finding other syndications that will pay 10%.
- Investor · Pensacola, FL · Member since 2017 · 50 posts · 21 votes3yThis is the part I'm still unclear on. Some of you are telling me it's not really secured, but I'm not fully clear on how you're coming to that conclusion.
Quote from @Tom Gimer:
OK maybe they turn out to be a legit company. But if they are marketing an opportunity as secured when it isn't... that's a problem. Good luck.
I was incorrect about my original statement where they would give me a quitclaim deed. They're just giving me a copy of a quitclaim deed showing they own the property that is securing the loan.
I guess it comes down to what the promissory note actually says and how it gets filed..?? - Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes3y
Quote from @Andrew Angell:
Quote from @Nicholas L.:
stepping back a bit - just curious - what interests you about this aspect of investing?
Cashflow. These deals have options to pay monthly, quarterly or annual interest payments with return of principal at the end of the term.
I'm in a syndication paying 10% monthly payments right now, and I'm liking that a lot, but I'm having trouble finding other syndications that will pay 10%.
There are plenty of syndications paying at or near 10%, just a matter of how long you want your $ tied up.
Regarding this investment, I would not touch this with a 10' pole as:
1. If a company has been in business 60 years, they would not be taking min. $25k loans.
2. There is no chance a business can survive paying 40% annual interest on a loan.
If it seems to good to be true, then it probably is.
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