Don't Get Stung | 7 Property Scams and How to Avoid Them

Avoid getting stung on your next property deal by understanding exactly how property scams work and fraudsters operate in the industry.
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Today we look at seven different ways that unsuspecting investors can be conned out their hard won capital and also at what it will take to make sure it doesn't happen to you.

▶ Property Scam # 1 - Inflated Rental Yield
▶ Property Scam # 2 - Joint Ventures
▶ Property Scam # 3 - Large Reservation Charges
▶ Property Scam # 4 - Inflated Property Value
▶ Property Scam # 5 - Refurbishment 'Package Deals'
▶ Property Scam # 6 - Land Deals
▶ Property Scam # 7 - Phishing

Property Scam # 1 - INFLATED RENTAL YIELD

There are scams out there in the property industry and some of them involve the promise of wildly inflated returns. Most often this is an appeal to greed, where someone is trying to get someone to invest based on the promise of unrealistic, and therefore very attractive returns.

Always do your own research and never take anyones word for what a potential return might be on any of your property deals.

Property Scam # 2 - JOINT VENTURES

Certainly, not all joint ventures are bad, far from it. We do joint ventures with our properties; with clients, partners, friends, family. Often joint ventures can work really well. We also know customers, clients and have colleagues that work and joint ventures and been very successful at doing so.

But in joint ventures you can be scammed. What's important is that first off you understand exactly how the property deal is coming together.

Property Scam # 3 - LARGE RESERVATION COSTS

When you reserve a property you want to buy, whether it's with an investment company or some other source, there will be some process requiring a deposit.

You need to know what amount is expected of you for you to reserve the property. But, you also need to know how the deposit is to be paid; how the payment is to structured and secured; and most importantly how much of it goes towards the deal itself (if any).

Property Scam # 4 - INFLATED PROPERTY VALUE

Overvalued property is most often a problem for people looking at investing in housing stock overseas. Obviously, it is much harder for investors to understand local valuations when they are not familiar with the area much less the country.

To avoid falling for this you need to look carefully at figures for the local area and make your comparisons. If the value of the property is wildly different from others in the area there might be a problem.

Property Scam # 5 - REFURBISHMENT PACKAGE DEALS

Some companies offer refurbishment properties as a 'package' meaning that they are selling both the property and the refurbishment together.

Some companies charge an up-front fee. So you'll be charged upfront for their sourcing of the property and the refurbishment. Now, I'm sure I don't need to tell you that refurbishment costs can be very high. If could be 20k, or 40, that you are being asked to pay out on day one.

Paying out amounts like this up-front can put you in a very precarious, even dangerous, position.

Property Scam # 6 - LAND DEALS

Where this turns into a scam is when these companies are actually selling protected greenbelt land on which you probably have no hope of ever being able to build.

Property Scam # 7 - PHISHING

Specifically, in property, what has been happening is that fraudsters hack the email accounts of solicitors and then send out an email from that account.

If a client is in the process of buying a property then of course it would be normal for that client to send the money to their solicitor. In this scenario the fraudsters might send out an email, from the solicitor, saying that their bank details have changed.

The client then sends all the purchase money to the bank account of the fraudsters and their money is lost.

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