Distressed IOUs and Real Estate Traps

Get Rich Schemes: Scammers

Lack of knowledge, that’s the problem.

As retirement investments, promissory notes and real estate can be excellent investments. However, they can become investment traps for the unsuspecting and unsophisticated investor. Common sense, practical experience, education, and honest and competent professional guidance will determine whether the investor is trapped or helped by the investment. Lack of knowledge about investing in general and about the specific asset is the cause of most investment disasters.

Let’s examine two categories of investment assets that are currently very popular with scammers and fraudsters. Distressed real estate and promissory notes will be the center of attention. The economic problems in the economy in general and the real estate problems in many communities and neighborhoods have generated a great deal of negative publicity and fear. This ad is capitalized on by schemers; they use it to reinforce their selling points when targeting the uninformed and unsophisticated. Here are some details on how sellers make a profit using real estate.

Distressed Real Estate Schemes: Due to the collapse of the real estate bubble, real estate investment deals have been on the rise, both legitimate and illegitimate. Regardless of market conditions, legitimate real estate investments are available and can be successful and profitable. But, in chaotic times, fast-money artists take advantage of the general climate of fear, uncertainty, and headline hype to trick the uninformed and unsuspecting into making bad investments.

Bank properties, foreclosed properties, distressed homeowners, pending short sales, and real estate investment groups have all been used as investment vehicles to target the untrained investor. All of these situations carry substantial risks, and each must be carefully evaluated. In many cases, an expert is required to understand and evaluate each of these individual opportunities; Objectively ranking them according to their individual risks and rewards is not the job of a beginning investor.

The other category of investments that we will explore consists of investments in notes.

Notes: Today, when a low interest rate is paid on all traditional investments, such as bank savings accounts and bank certificates of deposit, investors are looking into non-traditional investments. Most of these investors are looking for the security of their principal along with a higher rate of return in these uncertain economic times.

In most cases, these investors are like a fish out of water when faced with an investment in notes. They are inexperienced with notes, their friends and family are probably inexperienced; consequently, they are very vulnerable to being duped by a scammer.

The scammer lures them with the promise of big profits and no risk. These notes give investors a false sense of security with promises or guarantees of fixed interest rates and security of principal. However, all investments, even legitimate ones, in promissory notes carry some risk that borrowers may not be able to meet their obligations.

As in all serious decision-making situations, an experienced, knowledgeable, and objective professional advisor can save the novice investor thousands of dollars in losses and many, many sleepless nights.

Warning Signs: There are danger signs (red flags) to watch out for when discussing a possible investment in notes with a selling seller, agent, promoter or investor. Certain phrases should put you on your guard. Here are some examples:

“I’m a promissory note seller and I’m here to help you.”

“I heard your question. Don’t worry about it now. We’ll get to the answer later.”

“This is a big deal. It’s selling fast. Everyone wants in. Hurry up and decide now.”

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