All Forum Posts by: Albert Tristan

Albert Tristan has started 1 posts and replied 7 times.

You haven't clarified how the contract was actually breached. Investments go poorly all of the time, that doesn't mean anything illegal or unethical happened. It's not a crime to be a bad flipper or investor and it's not uncommon for experienced investors to have a deal that doesn't go the way they planned.

How was your investment protected- what instrument did you use? Is it secured by real property in any way?

So not secured by deed of trust or real property. The "breach" was the following:

"To initiate renovation, (lender LLC) agrees to front the initial renovation expenses (the "Bridge Funds") required to begin work prior to the release of funds from the hard money lender.

Once a draw is requested and disbursed by the hard money lender to (borrower) LLC: - (Borrower LLC( agrees to immediately reimburse (Lender LLC) for the corresponding amount of Bridge Funds previously advanced.

This process will repeat for each draw phase until (Lender) has been fully reimbursed for all interim renovation funding.

The total amount advanced by (Lender LLC) shall not exceed $50,000, unless mutually agreed in writing.

These interim advances are not structured as an interest-bearing loan, but rather as short-term bridge funding to maintain project momentum and enable (Borrower LLC) to meet the draw requirements of the hard money loan.

(Borrower LLC) agrees to keep accurate documentation of all expenses and submit timely draw requests to the hard money lender in accordance with the loan agreement, ensuring prompt reimbursement to (Lender LLC)."

The breaches were

1. they did not reimburse me with the hard money draws as agreed

2. they went over 50k without notice

0 Votes

Fort Worth, Texas

Quote from @Chris Seveney:

Quote from @Albert Tristan:

Hello, I was involved in a private lending arrangement for a property rehab in Fort Worth where the funds I provided (53k) for the rehab cost, which were handled by the investor's project GC/agent. The property is now listed for sale, but repayment of my investment has been delayed and there’s concern that some of the funds may have been mismanaged as they almost went 100% over rehab budget and have yet to show transactions of where my money went. It was agreed that they would pay me back with the hard money loan draws but have only paid me 8k and still owe 45k+.

The investors are claiming they gave all the reimburstment funds to the agent/P.M. and aren't getting answers from him as to where the money went.

For anyone who’s dealt with this before, what are the best steps to take in Texas to protect myself and ensure I’m repaid properly when the property sells? Should this be handled through title, a lien, or another legal agreement?

Appreciate any guidance or referrals to local real estate attorneys familiar with private money or JV disputes.

Thus far, i've mailed them a "Notice of breach" and "Demand for Remedy" letter to their biz address.
What should my next steps be to recoup the 45k+ still owed & past due?

1. Who signed the note? I assume it is the owner of the property?
2. If there is no deed of trust, you cannot record the note against the property, you would need a judgment for that. You could talk to an attorney about a mechanics lien if you bought materials directly for the property but you would need to have the attorney figure out lien rights you have.
3. Get an attorney ASAP. you posted this 24 hours ago, you should have reached out to 3 attorneys by now. We use MWZM law who is great, but not cheap.
4. As mentioned need to understand status of project, I would send somebody by the property and also figure out who the first is and see if they started foreclosure.
5. Curious where you learned this method of lending money without getting it secure? Did you do this on your own or did a guru teach this?

1. The two brothers who got the hard money loan signed the note

2/3 - noted, im on it now

4. So the house is currently on the market and completed, they're just telling me they will repay me once it sells (but at this point their word means nothing)

5. No guru, it was a proposition that made sense to me at the time, as i figured i would not be at risk since i would immediately be paid back from the hard money draws (unless they had no intention of paying me back and kept the draws for themselves - which seems to be the case)

0 Votes

Fort Worth, Texas

Quote from @Jeff S.:

You are not in second position, @Albert Tristan. You are an unsecured lender with no position because you do not have a recorded deed of trust (in Texas). This is the only document that establishes your loan position. It is a lien against the property and allows you to foreclose. It also ensures that the borrower must pay you back when the property sells, even if it means they bring a check to escrow. Otherwise, a recorded DOT gives you the right to foreclose. Your unsecured note does not. This should be your highest priority, assuming your borrower is willing to sign.

It doesn’t matter what the 1st position HML says. Jay is right. Due on encumbrance clauses in some notes, which try to prevent a borrower from taking out a subordinate lien, are unenforceable for 1 to 4 unit properties. Your borrower can sign a DOT with no fear that the HML has any recourse, which they do not.

I don't know what you mean by amending your agreement. Loan position is established by the order the DOT is recorded. It's the only document that a title company will respect when the property sells and which will give you leverage. At the absolute minimum, a title company could arrange the DOT and also tell you if there are any other recorded liens against this property. The safer way is to use either a lending attorney (preferred) or a real estate attorney and a title company.

“I know this wasn't handled the best way. (it's my first private money deal) …”

I hope it’s not your last private money deal, Albert. I would never blame you, but I am curious about how you got sucked into making an unsecured real estate loan using credit cards.

The rest: insurance claims, reporting the agent, reporting the contractor, attorneys general, demands for remedy, and so on, will not get you paid back. These are low priority.

Thanks for the info! I'll prioritize the DOT and get that signed today or move forward with pursuing legal action on the breach of contract. (If they refuse to sign a DOT, would I have the option of filing a lien or memorandum on the property?)

So the investor was someone I knew personally, they reach out about lending opportunity and introduced me to their Agent who was handling their deals for them. I told them I didn't have the available cash for the renovations and they proposed since i mentioned before I had just opened a large line of credit on my biz credit cards which have 0% interest for 12mo, if I would be open to letting them use the cards for the renovation and once they receive the draws from the HML they would then wire those draws back to me to pay my balance off. And for doing that, I would be 40-me/60-them equity split in any proceeds of the deal.

At the time seemed like little risk was involved since we had a written agreement on the deal, but once they started telling me that a GC took some of the funds and how they had to use my credit cards ALONG with the HML draws to finish the rehab I wouldn't be able to be paid back yet until the property closes....

So here we are a week later and they haven't given me any proof that they indeed spent over budget on the rehab.

1 Vote

Fort Worth, Texas

Quote from @Jay Hinrichs:

Quote from @Albert Tristan:

Quote from @Patrick Roberts:

Quote from @Albert Tristan:

Quote from @Patrick Roberts:

Sounds like the damage is done at this point. A couple questions/major concerns:

- did you give the borrowers all of the money up front, or was this paid out in draws as work was completed?

- you mentioned hard money draws; what position is this loan in, and is it even secured by a Deed of Trust on the property? Does the hard money lender know that they are using HML funds to repay your loan?

- you said you mailed demand letters; do you not have an attorney handling this for you?

Good q's, so payment was made through my biz credit cards that the PM/Agent had during the 3mo renovation process. Various charges throughout the 90 days to GC's.
HML is in 1st position. As of now I have a promissory note (notarized) laying out the deal structure and repayment structure that I would get reimbursed through the HML draws. (my capital was supposed to be just to get the project started until they received the draws. However now the PM/Agent is telling me he used my 53k in available credit to do the rehab, (told me a contractor ran off with 18k), and then that it cost him an additional 36k to finish the rehab. (mind you this is for a 980sqft house in a class B neighborhood...)

So no deed of trust or second position lien as of now. I don't think the HML is aware of the agreement.

I don't have an attorney representing me at this time. I was just informed on this situation last week when I told the Agent & Investors I needed to be paid back already.

I know this wasn't handled the best way. (it's my first private money deal) and thus far all I have is the original agreement, the transactions on my credit cards. The investor has been cooperating as he believes the PM/Agent is hiding something as well, so they've sent me their HML draws & transactions of them sending it to the PM/Agent via zelle's. Along with text convo's and some recorded calls.

This is an unsecured loan. Call an attorney asap to see if you can attach the property to the debt. Very strong probability that you dont recover these funds as the best case scenario is that youre in second position behind hard money on a flip that is blowing up. You also need to find out the status of the HML asap. It may be in default as well, which means arrearages, default interest, late fees, etc are piling up and consuming equity.

If Im understanding correctly, you paid for materials directly using credit cards, and then allegedly the contractor ran off. I would consider reaching out to local law enforcement about this after you discuss with an attorney. This sounds like there could be fraud involved. It's very common for contractors to charge materials to a job that are not for that job and then keep them for another job. Many states also have contractor fraud statutes that allow for prosecution of contractors who take payment for work but then dont complete the work or return the payment.

Not gonna lie, you've made a mess of this. It's going to be an expensive lesson. Not kicking your when you're down, but rather being realistic about the likely outcome of this situation.

For sure, expensive lesson to learn. So right now the HML is in good standing, the investors are making the monthly payments and we've projected this to sit another 2 months or so and should be fine there. With the numbers as they are even with the extra rehab expenses, there should be enough meat on the bone to pay me back my 45k once it sells & after HML is paid off. So what im looking to do is make an amendment to the agreement that I will now be in second position (if thats even possible this late in the game) and have title instructed to pay me what is owed before Investor get's any return. The investors have been cooperating thus far and want to make things right and feel victimized by the Agent/PM as well. So as long as we can get that in place I should somewhat have some reassurance since theres still equity. It was just listed 2 weeks ago.

We are also considering reporting the Agent and opening a police investigation since they are refusing to provide any documentation or proof of transactions for the said "extra 36k in expenses, (not including the 18k they claim a GC ran off with)

sounds like a Morby gater fund deal to me.. but yes if the borrower will agree to signing a DT and recording it you should do that post haste.. I am not positive but I suspect no one told the HML about you or your deal set up..

If you cant get security right away and you dont get paid your remedy is to sue on your note.

Yeah seems like I won't be able to secure 2nd lien position this late in the game due to HML agreements. So thinking right now I can "Secure" myself with a Promissory note stating they will pay me back my remainder $ in X amount of days once the property sell"
Then of course if not then pursue legal action.

Any advice on how to handle the Agent/Project manager? The investors on this deal are also considering pursuing legal action against him for this situation, but there was no contract agreement in place for him handling the funds/project etc. so not sure how much power there is there.

1 Vote

Fort Worth, Texas

Quote from @Patrick Roberts:

Quote from @Albert Tristan:

Quote from @Patrick Roberts:

Sounds like the damage is done at this point. A couple questions/major concerns:

- did you give the borrowers all of the money up front, or was this paid out in draws as work was completed?

- you said you mailed demand letters; do you not have an attorney handling this for you?

Not gonna lie, you've made a mess of this. It's going to be an expensive lesson. Not kicking your when you're down, but rather being realistic about the likely outcome of this situation.

1 Vote

Fort Worth, Texas