10 Steps to follow to Avoid Getting Scammed in Real Estate
After being the newbie real estate investor that got scammed on her first deal I decided to create a list of the 10 Steps You can take to avoid being a victim of a scam.
1) Don't trust anyone. Trust yourself. Trust your gut.
That's right. I know it sounds harsh. Am I really saying not to trust your family, friends, coworkers, fellow BP members? Actually, I am. At the end of the day you have to trust yourself. I made the mistake of not trusting my myself or my gut. Unfortunately in this business there are too many individuals that know how to take advantage of people. So be careful.
2) Google it or Do your Research
Whomever you plan on working with make sure you research them, and I'm not talking about staying on page 1 of your search results. Actually google the person or company's name followed by the words "scam" or "reviews" or "fraud". You will sometimes be surprised what you find. Also, check to see how many websites they have. Scammers will often times create many different websites to lure in their victims. They are trying to portray a persona of success.
3) Meet with the person you plan on purchasing the property from, or partnering with.
When i say meet I do not mean text message. Actually sit down and talk to them face to face.If you ask them to lunch and they don't or can't meet with you but are willing to take your money and ask for your account information then avoid them like the plague. No one is going to care more about your money then you are. Get to know them both personally and professionally. Go see their properties, get referrals, find out everything you can about their business. If they don't respond to your emails or phone calls and only text you that is not acceptable. This is relationship you are establishing so make sure it's a right match.
4) If it's your first investment I would not recommend investing site unseen and out of state.
If you can't see it. Then it might not exist. Try to invest somewhere locally where you can drive to the property to see what is being done. I know some individuals want to be passive investors, but that can bite you in the you know what. The more passive you are, the more open you are to being taken advantage of if you don't know what you are doing. Be active on your first investment.
5) Ask to see the books
I am not talking about reading material. Ask to see the receipts, the budget, the time line. This is a business transaction and you are giving someone money. You want to see what the plan is and be updated on where your money is being spent.
6) Get legal advice.
If you don't want to spend money on an attorney then don't do the deal. Make sure everything is reviewed by an attorney. Don't try and save money in the end, because at the end it will likely cost you more than what you would have spent to begin with.
7) Have filters
What do I mean by filters? This would your team, your support system. If they start questioning what you are doing and why don't get offended or defensive. This can lead to you feeling angry or upset and making decisions on your own or too quickly without taking the time to sit down with someone and thinking it through. At the very least discuss the plan with an attorney.
8) Don't think you won't fall for a scam
These criminals are good. Very good. Some of them it's obvious. Some of them can do this for years and years without getting caught. You might be the smartest person on the planet and that does mean you can't fall for the scam.
Scammers don't typically go after the weak in real estate. Those who get scammed are often very well educated and have the funds. If you don't have funds they will try to encourage you to find them. I would pretty much guarantee that at some point in this business someone will try to scam you. So be very careful, and like I said in #1. Don't trust anyone. Trust yourself.
9) Make sure everything is in writing
Once again. Not text messages. Any correspondence you have with someone try to keep it to email. There will be an electronic record of your conversations and if anything happens you can always use that in court. If you have lunch follow up with an email discussing thanking the investor for meeting you and what you talked about.
10) Pay for a background check
This probably goes in line with #2 but I would highly recommend paying for a background check on anyone you plan on working with. Yup, even if it's your mom.
If you want to read more about how I got scammed (and yes this is a true story with real facts and it is long) then here you go.