Business Insider reports that fraud within the real estate industry is on the rise. This increase is likely a reaction to a somewhat hostile housing environment. Buyers and sellers are feeling desperate, and that desperation is something unsavory characters will take advantage of. Unfortunately, these aren’t all scams we can see a mile away.
Even industry professionals are being tricked by sophisticated ruses. Real estate investors aren’t immune, either. With that said, you can take a few key steps to protect yourself…and your wealth!
These fraudulent schemes come in all shapes and sizes. Even if you know the common traps, fraudsters always look for new ways to steal your hard-earned money.
Maintain These Lines of Defense Against Real Estate Scams
1. Use only established mortgage lenders
Though mortgage fraud peaked in 2015, there are still lenders who will lie and mislead their borrowers about their products. Leverage is one of the most powerful tools at your disposal. We suggest finding a single reputable lender and sticking with them as much as possible. The more experience you have with a lender, the more secure and knowledgeable you’ll be.
While we have nothing against up-and-coming lenders per se, it’s always better to rely on an established entity. It also helps if they’re particularly experienced in investment property financing.
2. Don't fall for expensive, guru-led seminars
We’ve all seen these advertised. If you’re a new and inexperienced investor, the promise of instant investment wealth after a weekend seminar is alluring. Beware: most of these self-proclaimed real estate gurus are full of hot air. While they might have a few nuggets of wisdom to offer, they’ll drip-feed their tips and tricks while safeguarding the so-called secrets to success behind a steep paywall.
There are no shortcuts in this business. Successful real estate investing takes time. There are no secrets that will bring you instant success, period.
3. Never waive necessary due diligence
Challenging market conditions can lead investors to compromise where they ought not. Due diligence stops you from making a hasty, ill-advised property acquisition and helps you avoid scams. Performing due diligence means:
- You thoroughly vet everyone you work with, ensuring you get what you’ve paid for.
- You have an eye for details. No one will trick you with a phishing email, wire transfer schemes, or other sleight-of-hand tricks.
- You never waive necessary inspections and evaluations. An accurate picture of the property gives you the most realistic numbers.
- You verify paper trails, keep careful records, and ensure everything adds up.
- You’re constantly in risk-mitigation mode: not just when acquiring properties but throughout every stage of portfolio growth.
4. Hire for reputation and results
We recommend investors identify the core services and people they need to get the desired result. The more people and companies you work with, the greater the risk of encountering a scam. The more an investor centralizes their vendors and partners, the better.
You’ll get to know and trust the people you work with. With that said, you must start with a foundation of trust. And that starts with reputation and results. Be willing to ask for evidence of success, such as year-end and quarterly reports. Listen to reviews and ask for verified testimonials. Be ready to make people uncomfortable when you vet them – it’s not personal. Your financial future is on the line!
Even if you don’t discover a scam, you still want to ensure you secure quality, compatible services.
5. Invest in your industry knowledge
Ignorance makes an easy mark. Increasing your scope of knowledge in this real estate world gives you several layers of protection against scams and fraud. For one, you’ll better know how things work. When something is off, you’ll recognize it. It also empowers you to ask tough, telling questions. The answers you get will clarify the situation. Similarly, a knowledgeable investor is harder to trick. Scammers and fraudsters recognize this and will likely move on to an easier target when they realize you’re committed to due diligence.
Never make the mistake of believing you’re above falling for fraud. Even experienced industry professionals can fall prey.
We’ll leave you with this important advice: utilize a trustworthy turnkey provider. Not only do they remove the risk of being scammed on a property acquisition (they’ve already purchased it and prepared it for renting), but their centralized services and established vendors keep everything running smoothly.
We've done the hard work of vetting options you can trust.
Ask us how to put them to work for you!
