All Forum Posts by: Andrew Angell

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..?? 

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..??

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.

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.

That's why I'm a little bit confused.  Their documentation shows the following:

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.

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. 

Thanks 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.

I'm researching some interesting private lending deals, and I'm a little unclear how this particular piece works.  I'm going to speak to an attorney, of course, but I'm trying to prepare myself a little bit even for that conversation.

I've got four similar deals I'm anazlying right now, but here's one example.

It's a development company building neighborhoods in the Southeast.  They are borrowing on a 3 month term at simple 10% with a $25k minimum.  So on $25k they'd pay back $27,500 in 3 months.  

We would have a promissory note and a quitclaim deed securing the loan with the properties they are developing, but that's where I'm a little unclear how that works.  What what would quitclaim deed have on it if they're still building these homes?  Land with nothing or unfinished homes on it?  

So if they were to miss a payment and I had to start the process of some sort of foreclosure, what would I be forcing them to sell?  The whole neighborhood?  Just one house?  

Anybody experienced with this sort of thing that could pass some tips to me?

Any information on this would be greatly appreciated.  Thanks!

Just wanted to come back and provide another update on my situation for people seeing this thread.

Everything worked out.  My distributions started in July and they've been on time each month since then.  

I think I was just caught in a weird timing situation.  They communicated very well all along, and with payments coming through I'm happy now.  

Quote from @Daniel Han:

I invested in BAM fund 2 last year. The last communication was the final property is to be closed end of May. You might want to drop them an email to see if things are moving according to the schedule.

 They missed the May mark.  Now they're saying June.  :(

So just a little update on my experience so far.  Sadly, it's not good.

I signed my commitment to BAM on 12/16/21.  I have yet to receive a single payment.

For 5 months now they've been telling me "fund II will close at the end of the month and you'll get your first payment ~45 days after that."

They're responsive, but they're always giving me reasons (ie. excuses) they weren't able to close.  The reasons do (kind of) make sense, but hey, you took my cash and you're supposed to be paying a preferred rate on it, and I've got nothing.  Anybody else caught in this mess with Fund II?

EDIT:  To clarify, I signed my commitment in December with the expectation based on their feedback that capital call would be very shortly after, and it would be closed to start payments by Feb at the latest.  They didn't do a capital call until March when I was told it would close at the end of April.  Then I was told it would close at the end of May.  Haven't heard any updates to know if that's actually happen this time or not.

This is my first syndication.  Is this par for the course? 

Heh, this happens every time I talk about this.  I always get a split on the responses.  Both online and with paid professionals in person.  

I can't believe there isn't any specific case law or examples of this being tested to know for sure, but I sure can't find any.

Anyway, thanks for the feedback!