Am I being scammed?

Question

I consider myself to be pretty savvy and, thus far, have been able to spot and avoid being scammed.  However, recently in my pursuit for private money there has come an offer that has me a little unsure of proceeding.

My business partner and I have been seeking private lenders or equity partners to join us in some of the SFR deals we are doing.  We've tapped our personal resources and are looking to partner with others.  In this pursuit my partner has been talking to an individual who says they can provide up to $2mm to fund our deals.

Through ongoing conversations we have settled on an agreement for the lender to provide basically what could be called a $500k line of credit that can be used to purchase properties.  Each property will be reviewed by the lender before actually releasing the funds.  In exchange lender will actually be an equity partner and will get a portion of the profits.

When the JV agreement was presented for us to sign I noticed one of the first  sections called for us to send $5k "as a fee required to start this funding Transaction".  When asked about the reason for the $5k fee the lender responded saying the money was for  "some of my costs for the SBLC and lending expenses.  It is an incentive to me to offer the $5,000 option and I bring in all the funds".  The funding for the purchases will be available in about 8 weeks from signing the agreement and send the $5k fee.

Everything else about this relationship seems legit, but, the request for monies up front causes me some concern.

Am I paranoid, or am I right to be leery?

Joel Owens · Answer

Yep Ibrahim...... (Those who have nothing to hide... hide nothing and the rest make excuses).

Aaron Mazzrillo · Answer

This private lender isn't Nigerian is he? LOL

Will Barnard · Answer

Don't ever fall for these scams, that is all they are.
Pease send $5,000 in unmarked bills to my address for this advice.
Thank you.
:)

J Scott · Answer

Assuming you're okay paying the $5000 junk fee, tell them that you'll pay it at the time of first disbursement of the funds to you.  Basically, if you need $100K for your first property, they'll provide you $95K, keep $5K as the fee, and then you still owe $100K.

That way you can be guarantee to get the funding prior to committing to this fee...

David Nolan · Answer

@Bob Yon Hi Bob. Sounds pretty much like a scam to me. But for anyone who thinks it is not a scam, I live in Australia and I have this little bridge to sell, juts across from my place. If you are interested please contact me on BP.

Ibrahim Hughes · Answer

Reminds me when I got a call off my 'private lender needed' ad in the NY Times several years ago. Dr. Devin Ross was his (alleged) name and he was (allegedly) calling from Seattle, WA.

He liked our model and agreed to fund us but wanted to come down and see the property we had under contract first. He insisted we purchase an airplane ticket and hotel room for him. I agreed but only after my attorney spoke with his attorney and I received a conditional mortgage commitment of some kind. He accused me of not being serious and I accused him of making it too easy for me to spot his scam. Never heard from him again.

Jeff S. · Answer

This is really nothing more than a junk fee, Bob Yon.  Something to me always smells when someone insists on upfront money to either show that you are serious or so they will be motivated.  Why does your partner need an incentive?  Isn’t the opportunity incentive enough?  Plus, why will it take 8 weeks for funding?  What happens then?

Do they actually have the cash in the bank?  You are well within you rights to ask for a proof-of-funds now, in the form of a recent bank statement.  No excuses.  In fact, it looks like they must now apply for a line of credit to help you (see SBLC) and expect you to foot that bill whether they get it or not.

These people might be legit, but they also might be making hollow promises they can’t keep.  Make it easy on yourself.

I can’t tell from what you wrote, but are these people lenders or partners?  If you don’t have personal relations with private individuals who really do have money (true private lenders who don’t use brokers), you might seek out some hard money lenders that loan directly (i.e. using their own funds) by getting references from others in your area.  Rates are dropping.

Jeff

Bill Gulley · Answer

Not a deal, they have no committment to lend, it does look scammy to me, ain't the way to do good business. What makes them approve any future disbursement, does it need to be 50% LTV on a perfect house? Run!!!!

You can do better with private money, see a broker in your area! Good luck....  :)

Renae Danielson · Answer

I am seeking a private loan (I have bad credit due to medical bills)

I have received a COUPLE lenders information From this site but they want money up front and send it to there Business Partner in Nigeria (scam written all over)

also, if I had money for upfront fees I wouldn't be looking for a loan

Any advice would be great. I am in Wisconsin

John Hamilton · Answer

NEVER pay anyone up front for anything. Definite scam! Anyone who can't provide 24 hr turn around for money transfers you should also run from.

Fundee BEWARE!!!

p.s. JV partners would ask you to show them the numbers and provide pictures and any relevant documentation of the property. Although it's a good idea to view the house or have a trusted local view the house, paying for their expense is also BS.

Am I being scammed?

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