Real estate investing is a tough business to crack into.
But that’s where the money is.
And where the money goes, scams will follow.
Unfortunately, real estate investment scams are becoming all too common.
Whether you’re the investor, a tenant, or a homeowner, scammers have a scheme up their sleeve tailored to swindle you.
Let me protect you from the 4 most common real estate investment scams, before it’s too late.
Like I said, it doesn’t matter how you’re breaking into the real estate investment scene.
Scam artists around the world have a concoction to run away with your money, and sometimes even your personal information.
Protect yourself and your investments from good-for-nothing scammers who have nothing better to do but prey on loopholes and unsuspecting investors.
Here are the 4 most common real estate investment scams, and better yet, how to avoid them.
1. Loan modification scams
This sort of scam was rampant following the 2008 housing crisis.
In loan modifications, scammers will seek out homeowners being crushed by their mortgage payments and offer a much-needed reprieve.
Sadly, their savior is really just after a quick buck.
They’ll offer to “lend” the homeowner money by modifying their current loan, so the owner pays less.
To salt the wound, they might even taunt to guarantee protection from foreclosure.
Sealing the deal, they ask the homeowner for an upfront payment and personal information like a bank account number.
When all is said and done, the homeowner stands to lose both their money and their property because of the scammer’s meddling.
To avoid this type of fraud, never engage in mortgage negotiations with a third party; always go directly through your mortgage company even if you have difficulty paying.
2. Rental scams
As an investor, searching for a rental property is usually in terms of finding one to rent out.
But if the tables are ever turned, and you’re the tenant, be cautious of online rental listings.
The truth of the matter is 90% of renters search for a property online. That can both up the convenience factor and pose a serious risk for fraudulent listings.
Scam artists will go to popular websites with legitimate properties listed and lift the photos, information, and location of a property they don’t actually own.
They’ll post them on similar websites or even well-known ones like Craigslist, advertising a property for rent.
Interested renters will be instructed to visit the property on their own because the “owner” is out of town.
Another red flag: if you have to look through the windows of a property to see it, something is probably up.
If the renter decides they like the property, they’ll be instructed to send first month’s rent to the “owner,” who will in turn mail back fake keys and high tail it away with the money.
To avoid this type of scam, ensure that you make the effort to view any property you’re interested in either purchasing or renting out.
3. Seminar scams
This type of scam soared during the housing market bubble.
Like most real estate investment scams, seminar scams operate under the pretense of wanting to help you.
The scammer will invite you out to an educational real estate investment seminar. They may provide actual help, but it’ll serve as bait.
This bait could come in the form of a workshop by an expert, to provide gullible investors with “get rich quick” tips.
While it may seem like these tips are for your benefit, they really serve to plants seeds of trust. These tips might even be legitimate, but what follows most certainly is not.
When the conference is over, the scammer will offer “limited time only” properties or additional classes that cost thousands of dollars.
Now that they’ve won your trust with information that cost them nothing, they swindle you into schemes worth thousands of dollars, with nothing but smoke and mirrors on the other side.
To avoid this type of scam, ensure any informative conferences or seminars you attend are by actual industry professionals, and people you trust.
For example, every year The Midas Legacy hosts an Annual Wealth Summit. This summit is put on by my team and I; we walk through all kinds of investing strategies meant to help you.
How do you know our invitation isn’t one of these scams? You can find our results and speak to our successful customers with just the click of a button. We have a documented track record of being in the industry that you can verify.
Other invitations such as these may not have your best interests at heart, as we have seen.
4. Title scams
Title scams are the least common on our list, but just as if not more destructive.
A scammer will use false documents to pose as a home seller, and recommend that you as a buyer not purchase title insurance.
When push comes to shove, you’re left spending money on a phantom property with no bailout.
To add insult to injury, the scammer may also request personal information for the purchase, which is where the chance for identity theft comes into play.
In short, to avoid this type of scam, always invest in title insurance. The company will verify if the home seller is who they say they are, and if the appropriate documentation is tied to the property.
Well, there you have it.
The 4 most common real estate investment scams laid out, so you know how to spot them.
Your path to wealth will be riddled with enough obstacles and hoops to jump through.
Don’t crowd your way even more by falling victim to scam artists who want nothing more than to trip you up.