Property investment – how do you avoid the scams?

Property Investment – and how to avoid fraud

Property investment oppotunities you’re considering, whatever they may be, require investment research to check out who you’re dealing with. There are a lot of scammers out there, and when it is as hot as it has been to invest in property in the UK, the sharks come circling. They don’t care that it’s your life savings and your children’s future that they’re stealing. They’d turn you over even if you were their grandmother.

In this article, you’ll find out how property investment scams are big business and a few clues as to the legitimacy of the property investment company you’re considering dealing with.

Fighting hard against property fraud

On average a fraudulent property investment company scam costs an investor £20,000, according to Citizens Advice. As you can imagine, the larger the investment, the larger the fraud. For most people, an investment in property is the largest they’ll ever make. Total cost to the public in the UK is in the hundreds of millions of pounds.

It’s bad enough when you’re duped out of your deposit, but you might also be conned out of borrowed money, too. It’s unlikely that the mortgage company will simply let you forego the debt. You’ll be left with a huge bill and nothing to show for it.

We applaud the efforts of anyone who fights against property investment fraud. For example, the Land Registry’s property fraud line helped more than 2,000 people in its first two years since it was set up in 2013. Between 2009 and 2015, the Land Registry’s anti-fraud strategies stopped fraud valued at more than £70 million.

Off-plan property scams – fact behind the fiction

There’s a storyline on Coronation Street where a rogue builder is in league with a scam developer. They’re going to pose as a property investment company, take investors’ money, and then wind up the development company.

That’s almost identical to a scam which 500 investors from Hong Kong found themselves wrapped up in. In fact, this is a case study in property scams. The off-plan property were sold to investors two years ago. The investors paid up to 85% of the property value as a deposit. Earlier this year the developer went bust and put itself into administration.

Property investment companies – 5 clues to legitimacy 

Some things should act as red flags to you as a property investor when it comes to property frauds. This include:

1.    The property investment company has only recently been incorporated

Most property fraud is committed by new companies with no track record. You can check how long a company has been incorporated by searching on the Companies House website.

2.    The company has a lot of negative comments against it

Search property investor forums and try to find negative comments about the company you’re thinking of working with.

Most companies will have one or two negative comments against them – you can’t please all the people all of the time. Think about a restaurant where you’ve had a fantastic experience, and search for it on TripAdvisor. You’ll find that some people rated it as ‘never go there again’. When the negative comments outweigh the positive by a large margin, that’s probably when you need to swerve the restaurant and eat at McDonald’s instead. It’s the same with property investment companies.

3.    No client testimonials

Every service company should be posting client testimonials. Of course, it won’t surprise you that these will be positive, but don’t dismiss them out of hand (and if they’re on video, that’s a very positive sign).

If a company hasn’t posted any testimonials, then you need to ask yourself why.

4.    Depth and breadth of website

It can be hard to distinguish between a scam company and a legitimate company just by looking at their website, but again, if you know what you’re looking for then the difference can be spotted quickly. Scammers will go to great lengths to make their website look professional and polished. However, you’ll probably find that a scammer’s site:

  • Has no depth to it. The front page and contact page are professionally done, but that’s about all you’ll find.
  • There is little or no regular investment news or activity on the site.
  • It will profess to be recommended by other companies or developers. Pick up the phone and ask – you might be doing a developer a favour by alerting them to illegal use of their name.
  • The website and company name might be similar to an existing brand name − Berkeley Development Investment Capital, for example (I just made that up, by the way).
  • There is no ‘Contact Us’ page.
  • Spelling and grammar are poor.

If in doubt, carry out investment research and check the WHOIS details. These will tell you who owns the website domain, when it was set up, and provides contact details.

5.    Company visit

Of course, perhaps the best way to determine whether a company is legit or not is to visit it. When you do, ask to be shown around the offices, and request information about previous deals that the company has completed.

Call me or one of the team here at Gladfish on +44 (0)207 923 6100 to book an appointment to come and see us. We’ll be happy to discuss our history, people, and the developments we’ve sourced for investors past and present.


David Lines

Brett Alegre-Wood
October 4, 2016

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