What is a Real Estate Ponzi Scheme?
A Ponzi scheme is a type of investment fraud that attracts investors with unusually high rates of return. The fraud scheme is only able to offer investors these returns, as the ‘profits’ exist only on paper. The returns are fake, and original investors are simply paid off with the money put into by new investors.
Eventually, when the perpetrator is no longer able to find an adequate number of new investors, the Ponzi scheme inevitably falls apart.
Real Estate Can Provide a ‘Hook’
Of course, to actually attract investors, Ponzi scheme operators need a ‘hook’. Investors are drawn in with a seemingly ‘legitimate’ investment opportunity. Then, the fraudsters provide unrealistic projections, make outright false claims and promises above market returns to puff up their investment. Many schemes use real estate as a hook for their Ponzi scheme.
Real estate seems like a reliable investment. However, like anything else, in the wrong hands, a real estate investment opportunity may simply be a scam. If you believe you were the victim of a real estate scheme, you need to contact an experienced Ponzi scheme attorney immediately to discuss your legal options.
Real Estate Ponzi Schemes: Five Red Flags
In some cases, real estate Ponzi schemes are incredibly sophisticated. As such, it can be difficult for even the trained eye to recognize the fraud for what it is. Whenever you invest your money, you need to do thorough research into the background of the individual or company offering the investment opportunity.
Doing research is the best way to protect yourself and to spot scams. The following is a list of five critical warning signs that indicate that an investment opportunity might be a Ponzi scheme:
Guaranteed returns: Nothing in life is truly guaranteed, certainly not investing in real estate. If you are being sold on an investment because it ‘can’t miss’, you should be extremely skeptical. You want to invest your money with a person who openly acknowledges the risks of investing in real estate.
Consistent returns: Somewhat related, real estate returns are rarely, if ever, consistent. If you find a real estate investment opportunity that offers returns that are guaranteed, consistent and above the market rate, you should walk away.
Information is hard to access: When you want information related to your investment, you should be able to get it without having a hard time. If you are hearing excuses, finding that paperwork is missing or being told that investment strategies are ‘secret’, red flags should go up.
Pressure to reinvest: On some level, a good opportunity investment sells itself. Heavy pressure to re-invest your profits, or to invest in the first place, is indicative of a problem. If the pressure is too high, you should walk away and find another investment.
Something feels ‘off’: Finally, in some cases, investment fraud victims feel that something is wrong, but they are not quite able to articulate exactly why they feet that way. This is completely normal. If you feel something is ‘off’, walk away; it is always better to be safe rather than sorry.
Were You the Victim of a Real Estate Ponzi Scheme?
The experienced Ponzi scheme attorneys at the Sonn Law Group are standing by, ready to help. Our team has successfully represented Ponzi scheme victims in the state of Florida, across the country and around the globe. To find out more about what we can do for you, please do not hesitate to call our team today at 1-877-969-2412 to schedule your free initial legal consultation.