Is potential partner a fraud?

Is potential partner a fraud?

Real Estate Agent · Member since 2019 · 14 posts · 5 votes

I was recently approached by a seemingly experienced real estate investor to partner with him to flip $1M+ ARV homes. We met for the first time at a networking event and after hearing I work in finance, he was overly eager to work with me despite me having no experience in real estate.

After talking a bit and showing me some figures, he invited me to view his properties in a town over 50 min away immediately after the event. It was a bit odd, so to be cautious, I brought someone I trust to accompany me.

We viewed the properties (which were beautiful), then he proposed how we could set up a partnership, where he sources the deals and raises funds from other investors, and I would manage the operations and budgeting of the flip to completion because I have no money to contribute. He would also teach me how to find deals throughout the process. He asked me to complete a credit check to prove I'm qualified to invest.

Further, he said because he would give me ~$1M for the flip, he wants me to quit my job to work for him full time (he gave me 48hrs to decide). As he pools together investor's money for the flip, he would also include the value of my current salary in the pool. Essentially, he wants to buy me out of my job using other people's money which is a red flag that he can't pay me himself. I don't want to quit my job without knowing this investor is the real deal. Further, he was making guarantees that I would become a millionaire within 3-5yrs.

I looked at public records on him and found 11 bankruptcy filings from 10-30 years ago. Nothing else since then. He claims to have been an investor for about 3 years; he's flipped dozens of houses, and currently has 30 properties under contract, so those records could be irrelevant. But these records are telling me that he knows how to work the system and isn't afraid of taking people's money then not paying them back.

I was thinking of asking him to do a credit check as well, but how else should I approach this? Why would he be so overly eager to work with an amateur he just met? Should I bring up the bankruptcies? Any other red flags come to mind?

(Note: For more background, I'm a girl in my mid-20s. He kept saying he wants to have a "nice, pretty face" as a fresh spin on his business. Not sure how to interpret this, but it felt a little inappropriate. The trusted person I brought with me was concerned that he would use me and my clean record, and parade me around as his CFO to help fix his tarnished reputation. This risks me losing my securities licenses.)

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Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes
7y

Hi Rio,

Maybe he wants something else (you know what I mean).

And that's all I have to say about this.

See this reply in the discussion

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  • Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    7y

    Yeah, this has red flags all over it.

    You say “he’s flipped dozens of houses and has 30 under contract”...

    Can You verify in public records that He has actually bought and flipped these properties?

    If by some chance he has done Any flips, see who his lenders were....talk to them, assuming they are private/hard money.

    We don’t know what market you’re in, but it doesn’t seem feasible he has 30 “good deal for flips” properties under contract, in Any market.

    If he’s actually done/doing this, he certainly doesn’t need you.

    I wouldn’t give him info for a credit check on you.

  • Westchester, NY · Member since 2018 · 38 posts · 52 votes
    7y

    If you have no money to contribute and are only managing the properties, why the credit check to “prove you’re qualified to invest”? If you’re only there to budget and manage then there’s no real reason to run a credit check IMO

  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    7y

    "Essentially, he wants to buy me out of my job using other people's money which is a red flag that he can't pay me himself".

    No it isn't.

    "The trusted person I brought with me was concerned that he would use me and my clean record, and parade me around as his CFO to help fix his tarnished reputation...". 

    This, unfortunately, isn't uncommon...or necessarily a problem.  It depends on many factors that went into why he needs it, and if those reasons still exist.

    "...This risks me losing my securities licenses"

    Now this is where I would walk away.  The rest isn't that big a deal for an experienced investor to walk into, because (hopefully) they would know what questions to ask, and how to put in risk controls.

    Risking your securities Licenses trumps everything.  

    This could be anything from a great opportunity...to a disaster for you.  In your current timeline of experience, I'd watch for the next opportunity, and pass on this one.

  • Real Estate Agent · Member since 2019 · 14 posts · 5 votes
    7y
    Originally posted by @Wayne Brooks:

    Yeah, this has red flags all over it.

    You say “he’s flipped dozens of houses and has 30 under contract”...

    Can You verify in public records that He has actually bought and flipped these properties?

    If by some chance he has done Any flips, see who his lenders were....talk to them, assuming they are private/hard money.

    We don’t know what market you’re in, but it doesn’t seem feasible he has 30 “good deal for flips” properties under contract, in Any market.

    If he’s actually done/doing this, he certainly doesn’t need you.

    I wouldn’t give him info for a credit check on you.

    I looked up the properties on the tax assessor's page and found that they were purchased by LLCs, which is how he said he sets up his purchases. I'm still waiting for the LLC docs to be pulled from my state's business records site to see if his name is on them. The reason he wants me involved is because he wants to focus more on the sales side than the flip himself. But bottom line, I agree that there are way too many red flags, so I won't pursue this.

  • Rental Property Investor · Dallas, Austin · Member since 2018 · 246 posts · 213 votes
    7y

    Run away! 

  • Member since 2018 · 14 posts · 3 votes
    7y

    I agree with Nina.  Run!! Run away fast.

  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    7y

    Uhm, yeah, somethings wrong here. Why would some experienced investor be trying to hire someone they just met, makes no sense.

  • Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes
    7y

    Hi Rio,

    Maybe he wants something else (you know what I mean).

    And that's all I have to say about this.

  • Realtor · Southlake, TX · Member since 2018 · 54 posts · 35 votes
    7y

    @Rio Peterson I would trust your gut!! This has red flags all over it to the point where I'd steer clear. Just looking at his track record would make me want to stay at my finance job.

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Russell Brazil:

    Uhm, yeah, somethings wrong here. Why would some experienced investor be trying to hire someone they just met, makes no sense.

     like fake uber drivers.  

    people don't make those kind of decisions within meeting you in the first 45 minutes unless there is other motives on a personal level.

    be careful

    and for sure protect your licenses .. securities carrys a ton more risk for being sued or even criminal than say a RE estate license or a lenders license.. your dealing with securities.. 

  • Real Estate Agent · Member since 2019 · 14 posts · 5 votes
    7y
    Originally posted by @Andre Debs:

    If you have no money to contribute and are only managing the properties, why the credit check to “prove you’re qualified to invest”? If you’re only there to budget and manage then there’s no real reason to run a credit check IMO

    He said he wants to see if I'm qualified to do a 1031 exchange from his other properties. But at this point, I'm nowhere near comfortable providing my info. I obtained the Cert of Formation for the LLC that purchased the property we viewed (which he said he was a member); his name was not on the doc. This makes me believe that he gets people to create an LLC in their own names, obtain funds from a hard money "hedge fund" (his words) that he uses in his business, and gets tied up in his messy deals. If there were any consequences, he can't be tied and would not be liable. With all the bankruptcies, this setup makes me certain that he cannot qualify for any kind of loans himself.  

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Rio Peterson:
    Originally posted by @Andre Debs:

    If you have no money to contribute and are only managing the properties, why the credit check to “prove you’re qualified to invest”? If you’re only there to budget and manage then there’s no real reason to run a credit check IMO

    He said he wants to see if I'm qualified to do a 1031 exchange from his other properties. But at this point, I'm nowhere near comfortable providing my info. I obtained the Cert of Formation for the LLC that purchased the property we viewed (which he said he was a member); his name was not on the doc. This makes me believe that he gets people to create an LLC in their own names, obtain funds from a hard money "hedge fund" (his words) that he uses in his business, and gets tied up in his messy deals. If there were any consequences, he can't be tied and would not be liable. With all the bankruptcies, this setup makes me certain that he cannot qualify for any kind of loans himself.  

     in the industry we call this a straw man/women..   If your looking to switch gears then you may want to seek employment in the field your interested in at least you will know the company is advertising for someone and is probably legit.

  • Real Estate Agent · Member since 2019 · 14 posts · 5 votes
    7y
    Originally posted by @Jay Hinrichs:
    Originally posted by @Russell Brazil:

    Uhm, yeah, somethings wrong here. Why would some experienced investor be trying to hire someone they just met, makes no sense.

     like fake uber drivers.  

    people don't make those kind of decisions within meeting you in the first 45 minutes unless there is other motives on a personal level.

    be careful

    and for sure protect your licenses .. securities carrys a ton more risk for being sued or even criminal than say a RE estate license or a lenders license.. your dealing with securities.. 

    Agreed. It was so difficult to get those licenses. I'm not willing to relinquish them this easily. When I brought up this concern, he brushed it off, essentially said not to worry. He wanted to manipulate the language in the LLC doc to show that TECHNICALLY on paper, I'm not managing the investment when in reality I would be. That dishonesty doesn't settle right with me considering how easily I would get caught and barred from the securities industry. Not willing to risk it.

    I think his motive is that he wants someone naive and inexperienced to fall into his trap in order to get funds from them since he definitely cannot. Once he gets the money, we would never see it again. 

  • Rental Property Investor · Dallas, Austin · Member since 2018 · 246 posts · 213 votes
    7y

    All I kept thinking to myself is a repeat of strawman from the 2006-2007 crazy shenanigans that went down and cost a lot of peoples lives and money. Run. And don’t even entertain this anymore. Block this guy for good.  And keep an eye out. I’m feisty so I would have eaten him alive with questioning him.  The nerve....

  • Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    7y

    @Rio Peterson too many red flags to even count. Get in the nearest figurative rocketship and fly away as fast as you can. This guy is full of shady stuff

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Nina Hayden:

    All I kept thinking to myself is a repeat of strawman from the 2006-2007 crazy shenanigans that went down and cost a lot of peoples lives and money. Run. And don’t even entertain this anymore. Block this guy for good.  And keep an eye out. I’m feisty so I would have eaten him alive with questioning him.  The nerve....

    I was deep into HML in those days 06 07 and I finally bought the Accurint ( Lexus Nexus) mortgage fraud module ( not available to the public) and boy you would be shocked .

    also you would be shocked at whats behind the curtain on so many in the real estate field..  just look at this wholesale thing going on no licenses no nothing.. you talk about financial shenanigans.. you can bet there is a lot goes on when you turn just anyone loss on real estate and financing.   

  • Morgan PorterBusiness Member
    Property Manager · Richmond, VA · Member since 2018 · 36 posts · 19 votes
    7y

    @Rio Peterson I read the whole post but only a few replies. Sounds like the consensus agrees with your gut.... run away from this guy as fast as you can.

  • Charlotte, NC · Member since 2019 · 14 posts · 1 vote
    7y

    As everyone else has mentioned in this post I would agree with them and walk away. Remember if something sounds to good to be true it usually is. This sounds fishy on so many levels. I'm more concerned with that fact that hes trying to string you in and give you a 48 hour timeline to decide. I mean let's be honest that's a huge decision to make in such a short period of time. At the end of the day I feel as if your gut instinct is already telling you to walk away. Listen to your gut. As a community we whole hardly support you. When declining his offer be polite but firm.

  • Real Estate Appraiser · Isabella lake, CA · Member since 2018 · 628 posts · 491 votes
    7y

    Run away like King Arthur from the killer rabbit! 

    There's a whole quilt of red flags here.

  • Bjorn AhlbladPro Member
    Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
    7y

    @Rio Peterson wow you are ideal for this fraudster. Financial credentials that are unquestionable, securities trading license-you could make this guy legit! All in an attractive package-wink! wink!

    If you would like to pursue this in REI do it with some of the top shelf operators on this site!

  • Real Estate Broker · Chicago, IL · Member since 2015 · 1k+ posts · 2k+ votes
    7y
    Originally posted by @Jay Hinrichs:
    Originally posted by @Nina Hayden:

    All I kept thinking to myself is a repeat of strawman from the 2006-2007 crazy shenanigans that went down and cost a lot of peoples lives and money. Run. And don’t even entertain this anymore. Block this guy for good.  And keep an eye out. I’m feisty so I would have eaten him alive with questioning him.  The nerve....

    I was deep into HML in those days 06 07 and I finally bought the Accurint ( Lexus Nexus) mortgage fraud module ( not available to the public) and boy you would be shocked .

    also you would be shocked at whats behind the curtain on so many in the real estate field..  just look at this wholesale thing going on no licenses no nothing.. you talk about financial shenanigans.. you can bet there is a lot goes on when you turn just anyone loss on real estate and financing.   

    I had a subscription to TLOxp in the past, which is Transunion's equivalent to Accurint. Amazing info on ANYONE. Really helped to weed out the big-talkers and complete frauds. Cost is prohibitive to a 1-off investor but totally worth it if dealing with many people, and puts credit profiles to shame as far as all the info they have. When folks complain of "big-brother", they really have no clue how much data these private companies harvest....

  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    7y

    This guy could be legit...or not.  There's only one way to find out...and it's expensive...and I wouldn't recommend it.  The cost could be your license.

    As an experienced REI, and a very creative one using money, I see a lot of questions I would be asking here, but I have a feeling that in the end, I would be walking away too.

    If I had a Securities License on the line, I would have walked away before he finished introducing himself.

    The next time you are looking at this deal, it should appear as only a speck in your rear view mirror, and then....poof!!..it's gone.

    Too many other "cleaner" opportunities out there for you.

  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    7y

    @Rio Peterson  Whether or not this person is legit, I am glad you didn't go with him alone and brought a friend.

  • Ian WalshBusiness Member
    Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
    7y

    I have learned to trust my instincts and gut reactions.

  • IN · Member since 2017 · 96 posts · 63 votes
    7y

    I'm going to quote you: "it felt a little inappropriate".

    It felt a little creepy to me, and I'm not even over there with you...and he is pressing you, too? If it's a great deal, the one with the goods does not need to push because he or she will know that a taker is coming soon.

    Yuck. And he was the one who approached *you*? And he has a perfect track record of fiscal irresponsibility? Personally, I'd sit on the sidelines and watch him from far off.

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