Real estate investing can make us feel unstoppable—until a deal goes sideways.
Across the country, investors are starting to whisper the same story: “They’re not paying… and they’re not returning calls.”
We were recently reminded of this on a Facebook post from Vena Jones-Cox.
Projects that looked bulletproof a year ago are now stalled, sitting half-finished with balloon payments looming. Private lenders are getting nervous. Borrowers are going silent. And respected industry leaders like Vena are stepping up to say what many are thinking: this has to stop.
“I don’t want to be the deal police,” Vena shared recently, “but I’ve had to warn a couple of people that they can’t try to raise money at meetings until they get their house in order. We can’t have people who are in default and refusing to talk to their lenders.”
The message hit home. Because beneath the frustration is something deeper—a reminder that our success as investors depends on trust, transparency, and communication.
From the Borrower’s Side
Most borrowers didn’t start out trying to default. For many, it’s a painful mix of bad timing and overconfidence. They underestimated how long a rehab would take, how much it would cost, or how long the house might sit on the market. When holding costs keep stacking up and the loan matures, panic sets in.
Some investors try to juggle their way out—borrowing more money to cover the first loan, taking on a second lien, or floating expenses from another project. It might work once or twice, but when the dominoes start to fall, it’s brutal.
If you’re the one caught in that spot, here’s the hard truth: you can’t hide your way out of it. The smartest move is to talk to your lenders before they call you.
Tell them what’s happening. Be honest. Propose a plan. You might be surprised how many will work with you if you communicate early.
As investor Sam Warf put it:
“I survived the ’08 debacle because I saw that I wasn’t going to be able to fix it. I went to my lenders and had the most uncomfortable conversations of my life—but they were happy to see me. We worked through it and all came out the other side better.”
That’s the key—when things go bad, proactive communication buys you options.
You might be able to:
- Sell the property, even if it means bringing money to the table.
- Convert a short-term rehab loan into a long-term hold so the property can cash flow.
- Negotiate a short payoff or transfer equity from another deal.
- Hand over the deed in lieu of foreclosure to clear the slate.
Every lender wants something slightly different, but they all prefer honesty to silence. Ghosting your lenders doesn’t just damage your reputation—it closes doors that might have saved you.
From the Lender’s Side
Private lending has exploded over the past few years. When the market was hot, 100% financing on a project bought and fixed for 80% of value looked fine—prices were climbing and everyone seemed to win. But when prices level off or dip, that same structure can turn a small mistake into a total loss.
Vena summed it up clearly:
“Borrowers are still borrowing too much, and lenders are still lending too much. One little boo-boo with the deal makes it dangerous for the lender who’s got all the money in it.”
Now that the tide’s going out, it’s exposing who was swimming without a life vest.
As lender Greg Middleton cautioned,
“Just because you know or recognize someone doesn’t mean you can trust them not to put you in harm’s way.”
Smart lenders are tightening up. Darrin Carey, who manages private loans through DCP, said he’s turning down more deals and reviewing his entire portfolio for potential problems.
“The non-responding dodgers will be getting payoff demand letters,” he noted. “The ones who communicate, we can usually work something out.”
The takeaway for our lenders?
Do your due diligence, on the borrower, on the deal, no matter how well respected the borrower. Fund through a title company. Record a mortgage or deed of trust. Get a personal guarantee if the borrower is using an LLC. And if you smell desperation—walk away.
As a Community: Our Shared Responsibility
Every healthy investing community thrives on connection and trust. That’s why leaders like Vena and others are so careful about who’s allowed to raise money in their groups.
“All good REIAs have policies about how complaints are handled,” she explained. “If people in default refuse to talk to their lenders, they shouldn’t be in the room pitching new deals.”
It’s not about punishment—it’s about protecting the group.
When someone defaults and disappears, it doesn’t just hurt the lender. It shakes confidence for everyone trying to build honest relationships.
But there’s another side to this coin. Which side of the story do we believe & what can we legally share as leaders? That balance is what separates strong communities from fractured ones.
As Sam Warf reminded us, if a borrower keeps the lines of communication open and asks for help, we should be there to support them. But if they bury their heads in the sand—or worse, start soliciting more money without telling the full story—they need to be cut off quickly and transparently.
Take Note: Attorney Jeff Watson who is a friend and advisor to MAREI is hosting a zoom meeting on November 18th talking through what he has learned and is doing for clients who are having loans that are not going to plan. We were able to get him to let us share it with our Members. You can sign up on the MAREI Calendar to get the Zoom Link. Meeting starts at 5 pm Central Time. We don’t know if there will be a replay available – but if there is, it will be based on your registration with that Zoom Link – which means register with MAREI, get the link and register with the link.
The Market Reality Check
Even seasoned investors like Jim Shapiro are seeing the same patterns play out.
“I see investors overpaying for so-so properties in so-so areas. That never ends well. Costs are up, prices are flat, and too many people are still relying on Zillow and Redfin for comps. When you overestimate rents by $200–$400, it’s a big problem.”
And Julia Deck-Russell added a practical reminder:
“Use 70% MAO, stay unemotional, and know your comps. Education and solid numbers are what keep you out of trouble.”
And keep in mind . . that 70% might need to be 65% or less.
The theme across all of these stories is the same—whether you’re borrowing, lending, or networking—don’t skip the fundamentals. The people who lived through 2008 still carry the scars and the wisdom. Ask them for guidance. Learn from their survival stories before you write your own.
Protect Yourself from Scammers
Then we have other scenarios, that we’ve seen come through the KC Market. Borrowers who probably didn’t intend to be scammers, but they borrowed without consequence or legal documentation once and it snowballed:
In one case, a self-proclaimed “guru” promised a 50/50 split with students—except he took money from ten different students for the same deal and disappeared. No paperwork. No property. Just ten investors out of luck. Turns out said guru was living under an assumed name and put up a good con.
In another case, a local investor ran what looked like a legitimate business—borrowing from one lender to pay another, flipping profits from house to house, until the whole thing snowballed into a multi-million-dollar Ponzi scheme. Every lender thought they had a lien on the same $89,000 house.
And even when it’s not outright fraud, over-leveraging kills deals fast. One rehabber took out second and third mortgages against future profits to keep projects moving. It worked—until one sale got delayed, another ran over budget, and no one wanted to be “next in line.”
There are even strategies taught to secure your debt . . with 2nd, 3rd, 4th. . . 17th position liens. All well and good if things work out, but if things go bad, those without 1st liens are probably out of luck.
Key here, if it doesn’t have paperwork and a title company recording stuff or it just sounds off or too good to be true, ask more questions.
Final Thoughts
Real estate is an incredible wealth-building tool—but it’s also unforgiving when we ignore reality.
Deals go bad. Markets shift. Mistakes happen. What matters is how we handle them.
- If you’re in trouble, reach out early.
- If you’re lending, verify everything.
- And if you’re part of a community, protect it by holding people accountable.
Because in this business, your reputation travels faster than any rehab ever will—and communication, honesty, and integrity are the only currencies that never lose value.
