How to avoid `easy money' sales pitch

Mark Weisleder
Special to the Star

Since warning consumers about the dangers of no money down real estate seminars, I have received more emails than from any other article that I have written. The overwhelming majority are from readers who have been victimized by these schemes in the past.

For buyers, the current historic low interest rate environment has offered a great opportunity to buy a home or investment property. It has also contributed to prices rising faster than they probably would if interest rates
were higher.

But the flip side is that if you are looking to invest in bank term deposits or certificates, it will be hard to earn more than 2 per cent on your money.

As a result, consumers are always looking for investments that will generate 10 per cent returns or more.

We have read too many unfortunate stories about investors who have trusted their life savings to financial advisers who guaranteed substantial returns, only to lose everything in the end.
In many cases, these were sophisticated investors who should have known better, but fell victim to the lure of "easy money."
There are many people promising similar guaranteed returns, but the investment is based on being part of real estate "clubs" or syndicates. Be very careful before investing anything with these clubs and do not be fooled just because they mention that everything is based on solid real estate.

Also be wary of strange terms such as "lease options," "contract assignments" or "hard money loans." If you don't understand the concept, do not put your money down.

Here are some tips to follow to ensure that you are not tricked by the next real estate sales pitch and that you do not lose the majority of your life savings:
Do not invest more than 25 per cent of your available investment funds with any one person or investment opportunity, no matter how good it seems.
Conduct research on the person who is presenting the investment opportunity. Check out their website and their references.
Who is presenting the opportunity? If they do not own the company or they are not the main principal, then remember that their sole source of income is a commission based on what you pay into the scheme.
If they claim to own many real estate properties, or the investment is based on real estate, ask for the municipal address of these properties and then hire a lawyer or real estate salesperson to confirm who actually does own the property, what they paid for it and whether there are any mortgages registered.

If the property is within driving distance, go and see it. If it is not close, be careful before investing. If possible, find a lawyer or real estate salesperson in the area where the property is to confirm the property is as described and who is the registered owner.

If the main principal lives in your community, arrange a title search on their own home to see whose name it
is registered in and whether there are any mortgages registered. Be careful if you find the property is not registered in their name or if there are unusually large mortgages registered against it.
If you see statements such as "guaranteed to make 10 per cent or more," "once in a lifetime opportunity" or "chance to get in the ground floor," watch out. It is never that easy.

If you don't understand it, then don't be a part of it. Remember, if it seems too good to be true, it is.

Mark Weisleder is a lawyer, author and public speaker for the real estate industry and a regular contributor to
Real Estate News. Email: mark@markweisleder.com.