As an investor, commercial properties can be an incredibly lucrative venture when you find the right opportunities. But with these types of investments comes risk and the potential for scams. Fortunately, the MoRe 2.0 Conference reviews some of the more common scams so you can avoid falling prey to unscrupulous operators. Being aware of the various kinds of scams can save you time, money, and possibly heartache. Check out some of the more common scams to avoid when investing in commercial properties.
- Pump and Dump Schemes: Pump and dump schemes are commonly seen when it comes to investing in commercial properties. As discussed at the MoRe 2.0 Conference, this is a fraudulent scam whereby individuals use false or deceptive advertising tactics to try to inflate the price of a property by convincing potential buyers of its potential for making a large profit.
- Property Investment Fraud: Another common scam in the commercial real estate market is property investment fraud. This is a scam that involves persuading an individual to purchase a property in the hope of making a large return, while hiding certain financial information or the real value of the property.
- Flipping: Flipping is a scam whereby a person will try to get you to invest in a property they claim they can quickly turn around and make a profit on. The property may be overpriced or not properly appraised. Be sure to thoroughly research any investment opportunity before you make a commitment.
- Money Laundering: Money laundering is a type of scam where a real estate investor is used as a vehicle for illegal financial transactions. An investor may unknowingly be working with individuals who are laundering money from illicit activities.
- Undisclosed Liens: Undisclosed liens can often be an issue with commercial properties. A lien is an unpaid debt secured by a property and an undisclosed lien may lead to the seizure of the property. As MoRe 2.0 Conference’s experts opine, make sure to research all title records prior to investing in any property.
- False Appraisals: Some investors try to sell a property based on a false appraisal in order to make a higher profit. Make sure to get a professional opinion from a qualified appraiser when evaluating potential investments.
- Unlicensed Real Estate Professionals: Not all real estate professionals are required to be licensed and registered. To be safe, always use a reputable real estate agent or attorney to help with the process.
- Construction Fraud: Watch out for schemes that require upfront payment for work that may not be completed. Have your lawyer review any contracts for any signs of illegal activity, and check in with the company regularly to make sure your project is being handled professionally.
Ways For Scam Prevention As Disclosed By MoRe 2.0 Conference’s Speakers
- Know the Common Scams: There are various commercial property scams that exist, so it is important to know the common scams before investing. Common commercial property scams as mentioned above, include leasing or sale of property that the seller does not own, over-inflated appraisal values, complex sale structures with high-risk investment schemes, and high-pressure tactics used to buy.
- Check for Reviews: According to MoRe 2.0 Conference, reviews from trusted sources such as friends, family, or online sources can be extremely helpful when it comes to identifying potential commercial property scams. Check reviews from past buyers and ensure the reviews have been written by actual people with verified accounts.
- Research: Researching potential properties and properties being offered by certain sellers is essential for avoiding commercial property scams. Look up the address of the property being offered, and make sure it actually exists. Confirm the sale of the property, and who the true owner is, and double-check that the details of the transaction align with local regulations and laws.
- Read the Fine Print: Before signing any documents, carefully read through all the terms and conditions of the property sale or lease agreement. Confirm all details, fees, and conditions included in the document before signing and verify that the information included is accurate and in accordance with local laws and regulations.
- Consult an Attorney: It is wise to consult with a lawyer who specializes in real estate before entering into any agreement or contract involving a commercial property. A legal expert can provide sound advice about potential scams, risks, and best practices for investing in commercial property.
- Get Everything In Writing: Before investing in a property or agreeing to a sale, ensure that everything is in writing. Obtain an attorney to review any agreement you enter into and have the other party sign off on any contracts. You can protect yourself by making sure everything is clear, thorough, and explicit. Ensure any money you invest or send goes into a protected escrow account that is secure and documented.
Although investing in commercial properties can be profitable, there is still a chance that a scam may occur. As reviewed at the MoRe 2.0 Conference, knowing what scams to look for and staying vigilant can help you stay safe.
