Detroit real estate investor from overseas gets fleeced yet again- why this happens and how to stop it
Last week, we came across what looked like a solid portfolio of properties:
-All 3+ bedrooms
-Most were occupied with tenants
Seemed great, but once we started digging, the horror story began to fully unfold.
The owner originally purchased these properties for way higher than the market price.
That was the first mistake in the domino of errors.
Big mistake #2, the investor trusted a local management company that they had not met in person nor interviewed to collect the rent on their properties.
After over-paying and trusting rental income to a completely unverified vendor, the cash flow stops and the problems begin compounding exponentially.
But, the true error isn’t in these two missteps. The true error began when the investor trusted the initial sales company that presented the investor opportunity.
Often, we hear the same refrain: Buy rental properties, earn 15-20% return per year, fully tenanted, cash-flowing investments.
Trusting this is always the beginning of the end.
As an investor, the further away from the investment property, the better the vetting and qualification process has to be for every component of the sale.
1. What kinds of properties are being sold? What kind of neighborhoods are they in? Who is independently verifying both of these aspects?
2. Who are the tenants? How long have they been there? Are they paying? Where’s the proof of payment?
3. What is the going rate for rentals? What is the going market rate for rent? Who is independently verifying both of these facts?
***Trusting the company or broker from whom you are purchasing the property is a huge mistake***
One of my favorite aspects of real estate is that nearly everything can be verified independently.
Want to make sure a property is in good condition? That should be confirmed independently.
Want to make sure the tenants have paid? That can be confirmed independently.
Want to see the exterior of the home and surrounding area? That can be done independently.
It is imperative that all investors take the necessary steps to protect their investments, especially when sending money to Detroit from thousands of miles away.
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Good luck and happy investing!