Settle an argument, please??

[financedope]

I've had an investment w/ a land development company (long story... owner guaranteed investment) that paid 8% for about 7 years. As you can imagine, in this economy, the company is hurting. In the last 6 to 8 months, the monthly dividend has either come really late or not at all. I've had to call our company contact every month... sometimes several times before it comes (they're current, but today is 4/25 and we're still waiting for April's check).

We're really counting on this $$ now, as I've been laid off. Every month when I get sick of haunting the mailbox... my husband and I have this discussion.

I think we should ask for the investment back and use just about 1/2 of it to pay our mortgage WAY down and pay off all our credit cards. I know I can get 5% on the remainder in my img savings acct. and we'd be mostly free and clear of debt. Credit cards go in a drawer and then we could be contributing to our savings and IRAs.

Husband thinks we should hang on to the investment dividend for as long as possible... and while I agree the 8% is great... he's not the one haunting the mailbox and stalking our contact at the company on the phone every month.

What would YOU do in this situation?

[disneysteve]

Not sure you've given enough info for a thorough answer.

If you've lost your job, the last thing you need to be doing is paying down your mortgage. You need to be keeping a big cash cushion and slashing expenses.

How do you figure you can get 5% on your ING account? ING is currently paying 1.5%.

Is getting your investment back a possibility? Do you need that money to get by and cover living expenses? Is there a chance the company may go under and you'd lose that investment? I think the main question is the last one. If the company could fold and leave you with nothing, I'd get the money out and put it somewhere safer. Sure, 8% is a great payment today, but if you are taking on too much risk to get it, it may not be worth it.

[maat55]

I don't see the economy getting better anytime soon. I would consider getting it back and paying off the CC's only. You will not likely get a 5% return in a safe investment.

If you are dependent on the income, maybe you could withdraw enough to clear the CC's. The stability of the company is very important.

[financedope]

Here are the details.

The original investment is $200,000. If we pay our mortgage WAY down (it's only a $70,000 mortgage) and pay off all our CCs... we'll have more than half left.

The interest pays us $1,250/mo... but involves numerous phone calls and juggling our finances till it arrives! Our last check was for $5,000 for 4 months of payments. The contact person said it was an oversight... the investment was secure... and he'd make sure it didn't happen again. As I said earlier... today is April 26 and we're still waiting on April's check.

You're totally right about the ING interest rate. I don't know what planet I was on!

As I said, my husband thinks we should keep the investment but the numerous phone calls are making me so angry and uncomfortable. I think we should get it back... pay everything off/way down... invest the rest... and live on what we make and even saving/investing would be possible!

[disneysteve]

As I said, my husband thinks we should keep the investment but the numerous phone calls are making me so angry and uncomfortable. I think we should get it back... pay everything off/way down... invest the rest... and live on what we make and even saving/investing would be possible!

That should make you angry and uncomfortable. A legitimate investment should not fall 4 months behind in interest payments, or even 3 weeks late. That would be a huge red flag to me that something fishy was going on. It sounds like they may be having trouble meeting their obligations. I would get out while you still can (if you still can).

Remember, the only reason Bernie Medoff got caught, after running a huge scam for decades, was because people started trying to withdraw their investments and there was no money to pay them.

[Joan.of.the.Arch]

I agree that the delays sound fishy....In my area we just convicted someone of a Ponzi scheme in which people thought they were getting legitimate investments. A second investment house here is under investigation for the same thing. (It hasn't gone to court yet, but from the little I know about it, it is not looking good!) ....This can happen to folks like you and me. And a guaranteed return on real estate? I'd be skeptical that it is even possible now to live up to the guarantee if it is 8%.

[boosami]

Do they try to get you to "reinvest" those interest payments?

[swanson719]

If you're having difficulty getting your $1,250 each month, I doubt you'll get your $200,000. Even if it was in writing that you have the option of getting your investment back early, that's a stretch, not to mention lawyers fees and hassles. Good luck with it, but it doesn't sound good. I would have gotten out at the first sign of trouble. People playing with that much money ought to know what they're doing, and to be late says there are big problems.

[simpletron]

I think the land developer is legit. basically the land developer fell for the same illusion as everyone else - "home prices always go up". first they took a bunch of easy loans from banks and expand their operation. when that wasn't enough they got "investors" to make interest only loans to them to furthur expand. everything ran smoothly while real estate prices went up. then the real estate bubble burst, and the developer is left with properties he can't sell or can sell but for way less. he then runs though his cash on hand making all these payments to investors and banks. then he has to sell the properties at depressed prices to make ends meet. like when there was a 4 month delay, he was probably waiting on some property sales and didn't have enough cash to pay all the investors and banks, so he just paid the banks and maybe some investors starting with the biggest. similarly now you probably won't get paid until he sell another property, which is taking way longer than "normal".

this company is on the road to bankruptcy as long as home prices are falling and even after prices stop falling, the company is going to have a hard time. so I would try to get out now and cut my potential losses.

if the amount of bank loans is less than what the properties are worth, then you might be able to get out because they could refinance your investment as cheaper bank debt. or you could try to settle for less like accept them giving you 180K and you forgive the remaining 20K or take a partial payment like get 100K after their next sale and leave 100K to get out later. otherwise I think you're stuck with it for a while.

[financedope]

The land developer is legit... and has been in business for 30 years. He was a friend who saw me putting my 200K into CDs and getting little interest. When things were good... I was getting a 15% interest on my investment. It went to 8% several years ago.

Things are tough for him now, but he's been really smart and has developed many rental properties which will keep him way above bankruptcy. I know things are tough... but this having to "beg" for the interest payment is making me, as I said, very uncomfortable. I've called now twice for April's payment and today is May 2.

I'm calling on Monday and asking for my investment $$ back. I'm done w/ these games.

Thanks for your suggestions/observations!

[nasser]

settle the problem

Hi,
At first you should of thought of the company before investing in it but now a days because of the econmic crisis everyone is trying to be rich and trying to find ways.

[asmom]

I just don't see how you could have a guaranteed return of 8 % for 7 years. That does not sound legit. Those are almost always some sort of pyramid scheme until they find that they don't have enough people coming in with fresh money to pay the others their "interest" payment. I will be shocked if you are able to get your investment back.

[disneysteve]

things were good... I was getting a 15% interest on my investment. It went to 8% several years ago.

That makes me even more suspicious. There is no investment that can return 15%/year on a dependable basis year after year. Getting 8% consistently is quite rare. What probably happened is early on, he was able to pay the 15% to the people who bought in early. As the number of new clients tapered off, he was forced to cut the payout to 8%. Now, new clients are probably scarce and he is having trouble keeping up any payments.

Please let us know what happens when you try to get your money back. Be prepared for a hard sell to leave it there and to give him more time. Just remain firm and demand the money in full. If he delays for any reason, alert the appropriate authorities.

[nanamom]

i hope you get it back, and I hope you let us know if you do. If you can pay off your mortgage and credit card debt and invest the rest that sounds great, as long as you don't use the credit cards any more that is. Wish I could do that!

[PetMom]

It could be both a legitimate company and investment vehicle - but-
whenever someone is dragging like this on just making your
interest payment that is not a good sign. If they were giving
you a much lower return reflective of these economic times and doing so
in a timely manner that might make more sense.

I would try to get out of this if you can or at least look into it. Do you have access to all those financial reports that companies furnish for investors to find out how they are doing (with you being wary of any funny accounting going on).

With asking for such a large amount in the form of your principal back one would wonder how they could produce that.

Once a person goes to bankruptcy the people owed money get to line up with all the other people they owe debt to and let the court work it all out with what is available.