Real Estate Investment Scams: 10 Tips to Protect Your Money in Partnerships

Real estate companies: have you ever been involved in one? They can be a good vehicle in certain situations, but they can also ruin you if you fall for a real estate investment scam. Take these tips and use them and save your money.

Successful real estate investors protect themselves from possible scams. Just because someone speaks real estate language doesn’t mean they mean well with your money. When I first started investing, I was approached by two men about partnering in some real estate deals. They showed me comps with all the sales data, estimated repairs, etc. and because they painted a great picture and seemed very knowledgeable about real estate, i fell into the trap costing me over $30,000 US dollars. You don’t have to make the same mistakes. Now you can follow 10 easy steps that will limit your risks while investing.

1. Take the advice of a group of professional investors.

In nature, the animals that survive are the ones that stick together. We should apply that same principle. But make sure the investor group is honest and willing to provide advice when you feel something seems questionable or too good to be true. You want to look for a network that not only sells you deals, but should invest in the deals with you. Now that’s putting your money where your mouth is.

2. Know your partners.

Never partner without knowing your partner. If you are considering partnering with a person who appears to be a professional, make sure to have your attorney seek him out to ensure he is clean. Your success will always be influenced by the people you surround yourself with. If the people you associate with are successful and trustworthy, you will grow. If your partners are scammers, you will be perceived as one of them.

3. Have a lawyer on your power team.

Be sure to have your own attorney represent you in every partnership and real estate investment. Having the legal paperwork done right will keep you out of trouble and protect your interests if you need to go to court. Trust me when I say that the cost of working with a lawyer is much cheaper than an ugly lawsuit because you didn’t do things according to the law.

4. Secure your money.

Keep any deposit for an investment in an escrow account until you move forward with the project because you can get your money back if things go wrong.

5. Do your own due diligence

Obtain market research and comparable sales from your own sources when you are unsure of the value of the areas. Drop by if you need to. This would also be a good time to talk to your mentors about the project you are considering. If your numbers work, take action.

6. Be insured at all times.

By investing in real estate title insurance, it is intended to protect you from any surprises. When buying apartments or any commercial property, also make sure you have general coverage. Trust me when I say you only need one deal to go south to pay for two whole life insurance policies.

7. Use the right contingencies.

When investing, you must incorporate contingencies to protect yourself. This is when that lawyer can work wonders. Give yourself enough space to walk away from the deal if something goes wrong. The last thing you want is to get caught up in a deal that will ruin you and you won’t be able to get out of that deal. Appendages are your friends!

8. Use money sources you can trust.

You can build these relationships before you start investing. The key is to make sure that others have a solid reputation. Ask for references and when you find one you can trust, use them regularly. You can also ask your mentors and they can refer you to the people they do business with.

9. Stay in control of your investments.

Successful investors aren’t afraid to stand up for themselves when things seem to change. A balanced portfolio strategy will make it easier for you to spot when something doesn’t fit with your plan. The addendums to your contract will be helpful. No one, not even a “partner” should control YOUR investments.

10. Keep relationships alive.

When you make an investment with someone who was trustworthy, continue to do business with them. Be sure to preserve those productive relationships. You don’t know how important it is to have a strong team in the market until you’re left alone when you fall into a trap.

I hope these tips help you invest wisely. Don’t let life’s dangers stop you from pursuing your vision. So minimize your risks and move on. And as my mentor says “May God hold you in the palm of his hands.”