Real estate investment fraud is rampant these days. Unscrupulous individuals prey on those looking to invest in properties, often promising high returns with little risk. Don’t be fooled. Here are 10 red flags to watch out for to protect yourself.
Promises of high returns with little risk. Any investment that promises returns that sound too good to be true probably are. Real estate investments carry risks like any other investment. Be wary of anyone promising huge returns with no downside risk.
Pressure to act quickly. Fraudsters try to get you to invest before you have time to properly evaluate the deal. Don’t be pressured into investing in anything without doing your own due diligence.
Lack of documentation. Ask to see documents like property records, appraisals, leases, tax records, etc. Make sure everything checks out before investing your money. If the seller can’t or won’t provide documentation, that’s a major red flag.
The property is unavailable to view. Never invest in a property you haven’t seen yourself. Physically viewing the property is the only way to verify its condition and potential. If you’re denied the opportunity to view the property, keep your money in your pocket.
The deal sounds too complex. Some fraudsters use overly complicated investment schemes and confusing language to trick investors into thinking an opportunity is very sophisticated. Keep things simple and avoid anything you don’t fully understand.
Promises of guaranteed returns. There are no guarantees in real estate investing. Anyone promising guaranteed returns is likely running a scam. All investments carry risks, so be wary of unrealistic promises.
High pressure sales tactics. Fraudsters use tactics like scarcity and urgency to get people to invest without thinking. Don’t fall for high pressure sales tactics. Take your time and make a rational, well-informed decision.
Unlicensed sellers. In many areas, those selling investment properties or securities must be properly licensed. Check with your state’s regulatory agency to verify the seller has the proper licenses before investing. If not, keep your money.
The seller has a history of fraud. Do some research on the individual or company to check for any history of unethical or illegal behavior. Search online for news reports, reviews from other investors, or check with consumer protection agencies.
Sounds too good to be true. The old adage applies here. If something sounds too good to be true, it probably is. Be wary of unrealistic promises and deals that seem improbably lucrative. When in doubt, trust your instincts.