Realty411 Magazine The Future of Real Estate is Here | Page 24

diligence
Kathy Fettke gives
insight on a recent
fraud investigation
- They wanted to offer the best deal in town.
Testimonials on their website raved about what a great
deal it was. “No worrying about property management!
No vacancies! No repairs!” Who wouldn’t want that? In
reality, that type of situation can exist, but usually only in a
triple net lease situation where the tenant agrees to pay all
expenses and repairs. It cannot work in a situation where the
seller takes on such enormous responsibility for thousands
of clients
.

Here’s what our
member thinks
happened next:
Half-way In:
How to Vet Out Turn-Key
Property Providers
(and Avoid Getting Scammed)
R
eal estate, like any investment, can attract lots of
scammers. How do you really know who you’re
dealing with? You see ads everywhere for “turn-
key” rental properties, but what does this really
mean, and how do you know who to trust? The owners of the
Bay Area Equity Group, a turn-key property provider located
in Campbell, California, were recently arrested on suspicion
of fraud. I saw these guys at a real estate expo I attended
last year and they seemed like nice enough people. What
happened?
Real Wealth Network has over 14,000 members now, so
it’s pretty easy for us to get information. It turns out that one
of our members purchased property through the Bay Area
Equity Group. I asked him about it and here’s what he told
me he thinks happened:
In the Beginning...
- They started
to get behind on
making owner
distributions.
- They realized they couldn’t meet the guarantees.
- They didn’t want to let their investors down.
How Ponzi Schemes Begin...
Often times operators need to rely on new money to feed the
old promises. In this case, our member suspects this is what
happened:
- Allegedly the owners started to buy distressed property,
perform a minimal rehab, and then resell far above market
prices.
- Proceeds from the sales allegedly went to pay for the for-
mer guarantees.
- It still wasn’t enough.
- They started out with good intentions.
- They made guarantees of 15% returns on rental properties
in Detroit, MI.
- Desperation kicked in. Allegedly they started to sell the
same property twice to different people, but only record one
sale.
Continued on pg. 83
- They offered to cover repair costs in many cases.
Realty411Guide.com

- Operating costs
ended up being
higher than ex-
pected.
PAGE 24 • 2014

reWEALTHmag.com