Investment Properties: Knowing When Things Are 'Too Good to Be True'
Whether you're new to investment properties or you've been around the block a few times, there's always a chance that someone out there is looking to pull the wool over your eyes. In fact, more experienced investors might do better to keep their guard up against scammers. Any time you find yourself wondering if a property investment opportunity is 'too good to be true' keep the following signs of danger in mind.
Low, Low Prices
Uncharacteristically low prices are usually a good sign that something fishy is going on. Be aware of the market and the current prices for properties in the area that has your interest. If you're ever quoted a price that is significantly lower than the cost of other properties in the area, it might be a good time to either do some intensive background research on the company you're dealing with or walk away from the transaction entirely.
The Promise of High Returns
It's a tempting prospect. The guarantee of high returns on a property is a common ploy used by scammers to draw in those who are unfamiliar with either the property market in a certain area or investment properties in general. If you're faced with the promise of unrealistically high returns on a prospective investment trust your instincts and make a point of demanding proof of these "high returns."
The Backer That Makes a Point of Being Your New Best Friend
A common tactic scammers tend to use in the property investment world is known as the affinity con. Backers or company representatives who are keen to build a strong bond or are eager to point out cultural, religious or other commonalities that you share with each other should be treated with caution. While friendliness and accommodation are both good qualities on the whole, if the people you're dealing with are emphasizing these similarities every time you meet, it might be an indication that they intend to use peer pressure as a tactic to put you in a more vulnerable position when it comes time to talk about numbers.
The Promise of Fast Returns
Property investment is generally a slow burn. For most people this form of investing serves as a passive income, which is why it's best to be wary of claims that a property will incur fast returns for the investor. Again, it's a good idea to investigate typical return rates for the area you're looking to buy into. If it's a newly developed region chances are official statistics won't exist yet, which means that you may have to contact property managers and owners in the area for an accurate depiction of the market.
Property development is a booming market that leaves plenty of room for scammers, con artists, or even simply less reputable firms to take advantage of beginners and experienced investors alike. If a transaction with a development firm is at all a possibility, regardless of your camaraderie with their representatives, it's important to do your research. Look into the operational history of the company, their employees, and their reputation among investors. The time to evaluate the trustworthiness and capability of a potential business partner is well before signing on the dotted line.