Like any industry, investing in real estate comes with the risk of scammers. However, most issues can be avoided by being wary of anything that sounds too good to be true. The following five scams are commonly used by con artists to try to dupe real estate investors.
“Get Rich Quick” Seminars
Be wary of real estate investment seminars that sound too good to be true, especially if they promise to show you how to get rich quickly. The information provided is often readily available online for free, and their aim is to con you into spending more money on coaching or expensive books. In many cases, these scammers will try to pressure you into signing up for something or investing in specific properties by telling you that you only have a limited amount of time to respond.
Ponzi Scams
Real estate Ponzi schemes involve the scammer convincing investors that they will receive extraordinary returns on their investment. The scammers then use the money for their own purposes and pay previous investors with money from current investors. These so-called “lulling payments” help prevent investors from becoming suspicious, but once the scheme collapses, the scammers disappear with the money.
Cold Calling Scams
Scammers sometimes cold call or email real estate investors and pretend to be brokers. They typically work from a script to convince investors that they can help with mortgage or real estate investments and mention offers that are hard to resist. Investors who fall for the promises of quick returns for almost no risk soon discover that the broker disappears once the money has been handed over.
Home Improvement Scams
This type of scam typically occurs on a smaller scale than other types of real estate scams, but it can be very costly nevertheless. It involves contractors approaching property owners with unsolicited offers for improving the property. These deals often sound too good to be true, and investors fall for it thinking it’s a cost-effective way to boost property values. The scammer usually asks for payment by cash or check before starting the job and then disappears without doing the work.
Online Sale Scams
Scammers sometimes take legitimate property listings and then repost them on online classified sites while posing as the estate agent or property manager. This scam is common with rentals, but it is sometimes also used for investment scams. Be wary of promises that sound too good to be true and claims of urgency. The scammer will often ask for a down payment or deposit to hold the property until inspection and then vanish if the investor falls for the scam.
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