8:38 AM
Carole
As our community, our global community, is assaulted daily with frightening financial news we start to think about exploring alternatives to traditional financial investment vehicles. And this is the time to beware, despite the tightening of credit guidelines, or perhaps because of the new lending practices,there are predators on the street. These wolves may look very innocent and seem as though they want nothing more than a "win-win." Instead of the traditional predatory practices that led up to our current economic situation, the new predator offers opportunities to invest with them and realize greater cash returns than through banks or other financial institutions.
Typically they will ask you to loan them money to acquire real estate promising that once the investment property is sold you will realize 10% 20% or even more annually on your money. They will claim that your investment is safe as it is secured by real property. It is important to remember that your investment is only secured by real estate if you are on the title- typically a warranty deed of some sort or you hold a lien on the property. If the entity offers you a personal note this does not guarantee that your money is directly tied to any particular property. So if approached by an individual or group offering this type of "opportunity," be smart, contact a lawyer and ask them to review any and all documents prior to signing anything or handing over any money. You should also contact a tax professional as even though you may actaullay realize the promised returns, there could be serious tax consequences.
I am not suggesting that real estate is a bad investment - in fact there are many financially distressed properties that could present significant equity gain in coming years but rarely is it a short term investment. The wise investor consults with his or her real estate professionals, broker and mortgage banker as well as their attorney and tax consultant, and sets specific goals for the investment. Historically, over the long term there have been very few vehicles with as strong of returns as real property. So if you decide to invest in real estate do your homework-we call it due diligence- learn everything you can and analyze, analyze, analyze and plan for any unforseen contingencies.
