COVER STORY
COVER STORY
Property investment scams Unfortunately , the property industry lends itself perfectly to fraud and scams . This is quite evident from the range of scandals that have rocked the property industry over the last few years : unscrupulous estate agents stealing deposits that should be safeguarded in trust accounts ; auctioneers rigging auctions to drive up the bids ; property investment syndications that have ruined thousand of investors ’ lives ; and property investment “ gurus ” who sell properties at inflated values or simply take off with investors ’ money .
Buy-to-let scams In buy-to-let scams , companies offer investors a turnkey solution to acquiring , renovating , and managing properties with guaranteed tenants and great rental incomes . But the investors end up with derelict properties in slums , no tenants and no income , while they are left paying rates and taxes and sorting out endless property problems . Investors should be especially wary of offers of such properties in other countries , which makes it difficult for the investor to inspect the property .
This scam can also take the form of property marketing companies who use buy-to-let seminars or training courses as a means to sell their own properties , or a developer ’ s properties , to investors at over-inflated values . In some cases , they might sell bargain properties that are actually located in slums , high crime areas or dilapidated areas .
Rental scams Rental scams involves fraudsters renting accommodation they do not own and have no authority to let . These properties may be for sale or untenanted for some reason , or may simply not exist . The scammers will collect a deposit and disappear without a trace . This scam works particularly well with people moving to another country or town and do not have the opportunity to view the property . Another variation targets holiday makers who pay rental deposits , only to arrive at a non-existent villa or one occupied by surprised owners .
Land banking Land banking is a form of investment in vacant land that can be acquired at a bargain price while awaiting planning permission to be granted by the local authorities . The selling point is that the value of the land will increase substantially once the planning permission is approved . Thousands of investors have found themselves proud owners of parcels of land for which planning permission is unlikely ever to be granted , because it is , for example , agricultural land or unsuitable for development .
Property acquisition scams Similar to rental scams , some investors have bought properties from fraudsters who never owned the property ; or bought property that did not exist ; or bought property that could not be sold legally . One such scam was the “ Johannesburg North ” scam through which a number of Europeans bought properties in “ Eloff Street ”, “ Commissioner Street ” and “ Market Street ” at a bargain price . But instead of getting a parcel of prime real estate in central Johannesburg , they were stuck with an empty piece of land 10kms outside the city , in a non-existent development .
How to avoid getting scammed Verify everything : If you receive an investment
opportunity from a well-known company , contact the company using the contact number on their website or listed in the phone book to verify the offer . Don ’ t use the numbers provided in the email or on the brochure offering the opportunity . Go online and research both the company and the offer , looking particularly for feedback from other investors . Seeing isn ’ t believing - remember that photos can be touched up and changed . Get in your car and check it out for yourself . Never assume that if someone is taking up an offer that he or she has done their homework . If you are appointing a service provider of any kind - from a building contractor to a lawyer - ask friends , neighbours or family for recommendations . Get at least three quotes and a copy of the contract and insist on a detailed breakdown of costs , as well as proof that
they are correctly registered and licenced . Take your time : Decisions made under pressure
are most often not the best decisions and are often regretted . Don ’ t make hasty decisions . If a company or a representative is placing you under pressure to make a quick decision , beware . This is often a clear indication of a scam . Never agree to offers or deals straight away . In particular , be wary of signing up for anything after an inspiring and rousing presentation . Take your time to investigate the offer and do your homework . Do the homework : Never invest in anything without doing thorough research . If you ’ re investing in property , visit the property at least once , but preferably several times on different days and during different times of the day . If you are buying vacant
14 JULY 2016 SA Real Estate Investor www . reimag . co . za