As sad as it is to say, it just seems like everyone is out to “get” everyone. From cybersecurity threats to identity theft, it’s understandable why people are on the hunt to generate extra money but it shouldn’t be at the deceitful expense of others.

Because generating additional income is one of the top goals for many driven individuals, people are trying their shot at real estate investing, and with good reason. Real estate investing is a very lucrative way to earn money, if done right. Getting it right is indeed the key to success, but, of course, you’re going to make mistakes along the way, and depending on the type of mistakes you make, it will determine just how costly that mistake will be.

Things like buying a property in a depreciating market is a costly mistake, along with renting to the wrong tenant is a mistake as well. But one mistake investors tend to make without even realizing it is falling prey to real estate investment scams.

Just as other scams are easy to fall victim to, real estate scams are even easier to fall for because it’s hard to tell the difference between a legitimate listing and fraud; and that applies to whether you’re an investor or a consumer. The Better Business Bureau reported that nearly 43% of consumers encountered phony rental listings.

The scams directed towards investors are slightly different from the ones directed at consumers, nonetheless, they’re all damaging, financially and mentally. As a real estate investor, the best solution is prevention… It’s much easier to prevent it than to spend time finding a cure.

As you embark on your journey to achieving passive income, mentally prepare yourself to know that scammers will be coming for you, and the best way to equip yourself with the right tools to avoid these scams is to be aware of them. Knowledge is power and how you decide to use that power is what’s going to ensure the success of your rental property.

Take a look at some of the most common real estate investing scams all investors should be aware of.

Real Estate Investing Scams to Be Aware of and How to Avoid Them

Condition of the Property Scam

As you probably already know, real state investing is growing more and more in popularity, and so much so that people all over the world are starting to invest in properties that are in cheaper markets. That means that an investor in California might buy a property in Tennessee because the market is cheaper there.

Unfortunately, that leaves plenty of space and opportunity for the seller to claim the property is in good condition when it really isn’t, simply because investors don’t come to look at properties often and go off of the word of the seller, which is a huge mistake. Typically, when a buyer makes an offer, the seller will insist on using “their guys” for the inspection and repairs to give the buyer the idea that the property is in good condition and that they have an already established network of contractors under their belt.

How to Avoid Condition of the Property Scam

Well, one way to avoid this scam is to look at properties through the Multiple Listing Service (MLS) or consult with a real estate agent with access to MLS or another trusted real estate platform. Also, always visit the property you’re considering investing in before making any solid deals.

Rental Loan Scam

Most real estate investors aren’t sitting on hundreds of thousands of dollars to invest in a rental property, so what do they do? They turn to property financing.

Investors utilize this versus conventional mortgage loans because conventional mortgage loans have much stricter requirements. On top of that, these types of loans not only don’t have the same standards for the conditions of the property but they also don’t have licensing as well. The money they provide to investors comes from private money lenders. And since there is no licensing required for these lenders, it can be harder to tell if they’re a scam or not… Not all private lenders are scammers either, so you have to look at that too.

How to Avoid a Rental Loan Scam

The best way to avoid falling prey to this type of scam is to only seek investment property financing from a trusted lender, whether it’s coming from a private lender or not. It could be a lender you’ve used before or were referred to by someone. You can even lookup lending companies on the Better Business Bureau website to check a lender’s credentials.

Rental Listing Scams

With rental listing scams, scammers will steal photos of actual listings from other real estate sites, change the description of the property a little, and have investors wire them the money to “pay” for the property.

First and foremost, if there is a property you’re interested in, you always ask if you can see the property. If they say they can’t let you see it because they’re out of town or for some other reason, there’s a chance that it may be a scam. They’ll also tell investors they can visit the property and to just look inside through the windows… Major red flag. Don’t fall for this scam without asking lots of questions.

How to Avoid a Rental Listing Scam

Oftentimes, these rental properties to invest in are listed at an exceptionally low price. Remember, if it sounds too good to be true, it probably is. Look for the property on other listing sites and speak to multiple agents about the property to see if the initial listing you responded to is real or a scam.


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