On July 23rd, I received an email that was forwarded to me by a friend named Ian Sanchez. The email explained the steps necessary to begin investing with Marco Santarelli of 360 Enterprises DBA Norada Real Estate, 30251 Golden Lantern, Suite E-261, Laguna Niguel, CA 92677 in a pre-construction program in Cape Coral, Florida. This outlines the events between that day and 4/26/07.
In brief, I agreed to supply the credit for construction loans and pay a management fee of $1,500 per property for ten pre-construction houses to be built in Cape Coral, FL, to Marco Santarelli of Norada Real Estate.in exchange, Marco agreed to coordinate the entire project as a hands-off investment with no payments due until the sale of the property. Marco was to find and procure lots, find builders and hire the home builder, real estate agents, mortgage brokers, and anyone else needed to bring these projects to completion.
Marco accepted my check for $15,000 for the management fees for all ten properties. He assured me they would all be started within 6-8 weeks and completed in 8-11 months. After 2 years and 9 months we had bought three lots, only two of which we built houses on. The agreement was spelled out in a joint Venture agreement, although through the course of the project Marco asked me a few times to sign a new management agreement; I never did because it stated a higher management fee than what we originally agreed to.
Promises
1) Management fee of $1,500 per property for ten properties.
2) It will take 8-11 months to find, build and sell all ten properties.
3) Investor (thats me) incurs no out of pocket expenses (except builder deposit and appraisal) during project.
4) Marco would handle all details (arranging agents, builders, lenders, etc).
5) Marco would keep an accounting of each property
6) Investor would only have to qualify one time for the entire project
7) Late payments from construction loans dont show up on investors credit report
Problems:
1) Manager actually charges $1,800, $6000, and $7000 respectively for first, second and third property, and refuses to refund any more than $3,200 (Interestingly enough, the manager thought I had paid $18,000 originally when I had only paid $15,000. This is just one of many instances that point to the ineptness displayed by Norada Real Estate in managing these properties. The rest are outlined in the attached table.
2) We suffered through the following timetable and buy only three properties total.
Address Time* until Contract Time* until Construction began Time* to CO Time* to Sale
1104 NE 36th St 8 weeks 12 months 25 months 27 months
1405 NW 9th Ter 24 weeks Never began N/A 21 months
236 NW 22nd Pl 60 weeks 4 months 30 months N/A still own
*All times are from the beginning of the project 7
Promised time to construct and sell ten properties: 8-11 months
Interest expenses after 11 months were therefore unexpected and came directly out of profits
3) Every payment to my lender was late (we therefore paid an unnecessary late fee every month). After about a year after originating the first two loans I started receiving statements from my lender and the builder stating that mortgage payments were due and I had to pay them (which I did with some help from Marco). The third property Marco eventually walked away from and left me and my partner with all the expenses on a vacant house that we cant seem to get sold (we still own it). To date I have paid 14,366.66 in expenses. These increases daily. So much for no out of pocket expenses.
4) I was constantly on the phone or in other contact with agents, lenders, the builder, title companies, county officials, and other investors doing things that were definitely the managers responsibility (arranging loan extensions, getting comps, qualifying and re-qualifying for loans, determining reasons for building delays, posting for sale signs, following up on contracts and closing dates, etc, etc).
5) I never received a K1 or any other type of financial update from the manager. The manager never knew what lender we were using, when our maturity date was, if/when we were getting or needing a loan extension, how much the loan extension cost, even whether or not we still owned any specific property. The manager also did not know that, after a year owning two lots, the builder had not even broken ground yet.
6) I sent in at least 6 uniform loan applications over the course of our project
7) I now have late payments from my construction loans (30 days) on my credit report and a significantly lower score (these were payments the manager agreed to pay).
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