Although investing in real estate is a great way to achieve financial freedom, it can be a perilous journey. There are plenty of con artists out there ready to take your money. Before you jump into a real estate deal, you should be aware of the scams that people try to pull. This article will give you tips about things to look out for when you are investing in real estate.
Sellers not Disclosing Needed Repairs
As a real estate investor you live or die by the information you are able to gather. One of the most important pieces of information is the amount of repairs that will need to be done to make the property livable. Some sellers will try to hide things such as a roof that is badly in need of repair. Repairing a roof can be very expensive. It’s best to do your own home inspection with your own inspector before you commit to purchasing an investment property.
People Posing as Real Estate Agents
Some unscrupulous people are pretending to be real estate agents. You may find a listing on Craigslist or some other classified ad site that seems too good to be true. You may put up earnest money to secure the property only to find out that the person wasn’t a real estate agent and the property they were selling wasn’t even for sale. Do your due diligence. Check that person’s real estate license before you hand over any money.
High Priced Investing Seminars
You may have seen the ad on Facebook or got a letter in the mail. The person looks legit. They have on a business suit. They promise to teach you how to be a successful real estate investor in a two-day boot camp for the low price of $1,997. So you excitedly fork over the money only to realize that the “boot camp” is nothing but a pitch fest with someone trying to sell you more books and DVDs.
To avoid this scenario, just ask the people you network with if they’ve ever been to the seminar you’re planning on going to. Most people will gladly share if they’ve had a bad experience at a particular workshop. Also check out the reputation of the “expert” that is holding the seminar. If you see pages upon pages of complaints on the ripoff report, then you may want to steer clear of this particular event. There are some GREAT seminars out there. You just have to do your homework and be diligent to make sure that you don’t get scammed.
Properties that are Tenant Occupied
If the investment property you are considering buying is an occupied foreclosure property, beware of the problems that can arise from this sort of purchase. If the tenant of the property is uncooperative he or she may not allow inspection of the interior of the property leaving the buyer totally unaware of what his cost will be to make necessary repairs and upgrades. Also, the occupants may refuse to move out leaving the new owner no choice but to pay costly court fees for an eviction. This will hurt the buyer’s bottom line because evictions can take months to complete. A disgruntled tenant who has just been evicted may decide to take a few things from the property in retaliation such as air conditioner units, heater units, appliances or create damages to the property that can lead huge repair expenses to the new owner.
Positive Cash Flow
Last but not least be sure you are making a wise investment. You want to be sure the real estate you are investing in will provide you with a positive cash flow. A negative cash flow will result in having to provide money out of your own pocket and can create a hardship on your personal finances. The housing market tends to fluctuate at times and a positive cash flow will ensure you can get through hard economic times as well as a vacancy or unexpected repairs.
While there are some dishonest people involved in the real estate business, there are also tons of honest people just out there trying to make a living. Real estate is a great vehicle to use to get out of debt and save money for retirement. Don’t let the few bad apples keep you from reaching for your dreams.
Ori Tal is a real estate developer from Cocoa Beach Florida. You can read more about him at orital.org.