It probably comes as no surprise that real estate investing is all about finding the best deals. After all, when one talks about investments, the word “profit” often comes to mind. Still, it is easier said than done. I mean, in today’s current property market, it is pretty difficult to score a deal that no one else even thought to have a look at.
However, are there any ways to tell you if a deal is too good to be true? Or will you have to fall prey to a costly fraud? Well, in order to help you out, here are a few surefire signs that your property investment deal might not be as hot as it seems.
How to Purchase Real Estate With No (or Low) Money!
One of the biggest struggles that many new investors have is in coming up with the money to purchase their first real estate properties. Well, BiggerPockets can help with that too. The Book on Investing in Real Estate with No (and Low) Money Down can give you the tools you need to get started in real estate, even if you don’t have tons of cash lying around.
4 Tell-Tale Signs Your Real Estate Deal is a Fraudulent Trap
The Property’s Representative is a No Show
If the owner of the property, the agent, or other real estate representative is unable to meet up with you face to face, you should be feeling a little uneasy from the situation at hand. Being a prospective buyer, there is no doubt that you should always feel confident that you are dealing with the legal owner of the property or even simply the legitimate property rep.
The sad truth is that the role of the landlord/seller often falls prey to impersonators, leaving even the smartest of investors looking like deers in headlights. So if there are ongoing excuses about why they can’t meet up with you, then it is definitely a good idea to double check their legitimacy before settling the down payment on the property. This is why it is always crucial to go through a title company because you have to ensure that the person you are dealing with is the actual title holder. For example, I once ran into a situation where the son tried to sell me the property when the title was still in his father’s name.
They’re Promising “Guaranteed” Returns
Let’s be honest, there is definitely no such thing as a “sure thing” or a “100 percent guarantee” in the real estate investing game — or any investment for that matter. This is simply because the very nature of investment is to accept the immediate risk for the possibility of gaining long-term profit. Therefore, if you ever see that there is a “guaranteed” profit with zero risk, this should be waving major red flags your way.
They Make Requests for Financial Info Up Front
This might sound so obvious that you are practically rolling your eyes, but it is super surprising to see how many people fall prey to this real estate scam. Imagine a picture perfect deal that seems totally believable in a good way; however, it suddenly asks you to give all of your financial info so that they can have a professional “company” vet you and make sure that you are a legitimate buyer.
Due to the fact that you really want to land yourself that killer deal, your psychological compulsions pretty much catapults you to throwing your hard earned money to them. Sadly, the unfortunate truth behind this all is that the large majority of companies that do this are simply trying to collect your financials for identity theft purposes, and even if they aren’t — do you really want to take that risk?
You’re Blind to Important Information
In the world of real estate investing, “selling out” has a different meaning behind it — it indicates a property being sold ASAP so that the owner can get it off their hands before it becomes worse than toxic waste. A little bit lost? Well, it goes a little something similar to this: There is an awesome deal on a wonderful property that you saw on the website of a reputable company. Honestly, everything looks extremely solid and nothing is out the ordinary at all. The rental income is great, it is in a good location, and currently, it is in high demand.
Unfortunately, what you haven’t been told is that the city council has just decided that they are going to build a landfill at the old schoolyard just a couple houses away. If you didn’t do your own research, you would have no clue that the value of the property will be taking a massive plummet, but since the property still looks good on paper at the moment, the current homeowner is trying their best to get the property off their hands before they have to be the victims of a massive loss. Although this is an extreme case, it is always best to do your own due diligence is my point.
The key message to this story is to remember that you should always make sure that everything that is known about the property has been shared with you. In addition, always stick with what your gut is telling you about a potential “too good to be true” deal.
Have you ever run into these types of scams before?
Let me know with a comment!