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Watch Out for Reasonable Sounding Investment Scams

Elaborate investment scams and schemes have been in the news recently. In some cases, looking back, it seems painfully obvious that the investment was a scam [3]. Sometimes, though, a scam isn’t so easy to spot. Because of recent high profile cases, some scammers are dialing back their tactics to reflect the wariness that some have with the idea that something could be too good to be true.

There are some very reasonably sounding scams out there. They don’t promise huge, immediate returns. And they seem like good ideas. In some cases, the scammer might actually be basing his or her scam on real investments [4]. Two of the more interesting scams going around, according to Consumer Reports, are promissory notes and real estate hustles.

Promissory Notes

In the real world of business, promissory notes are used to smooth the way for different businesses. It’s possible to buy and sell them on the secondary market. These are essentially promises to pay. In many cases, promissory notes are supposed to be backed by “real” assets, such as oil leases. In some cases, they are also related to life insurance payouts.

Scammers can use promissory notes because it seems like you are going to receive an attractive rate of return. However, because the note isn’t paid out until some point in the future, you don’t think about a huge, immediate return. You don’t want to be scammed [5], but at the same time, in the current low-rate environment, a promissory note seems like a sure thing. However, the notes could be fake. If they are, you’ve invested your money, and it’s gone. You want to make sure you are dealing with a reputable seller before you become involved.

Real Estate Hustles

There are plenty of real estate investment opportunities [6] out there, and some of them can provide you with solid returns over time. However, you have to be on the watch for scams. Right now, there is a lot of interest in real estate because it’s possible to get a good deal. You might be given the “opportunity” to participate in some sort of deal in which you pool your money with others. This is an attractive scam to those who want to invest in undervalued real estate (especially commercial properties or rental properties), but don’t have the capital to make such a large investment.

If you pool your money, you could become a part owner in a rental complex, foreclosed homes, or a tract of undervalued land prime for commercial development. Again, there are completely legitimate deals surrounding these tactics. However, you have to be careful and do your research. Scammers set up fake partnerships and LLCs in the hopes that you will “invest” your money. Then, they take off. In some cases, the scammers go so far as to show you a property for sale, claiming that it is the target (even if it isn’t). You have to be on your toes and make sure that you are dealing with someone who is a true professional. Just getting in on your co-workers great deal isn’t enough.

These types of scams are especially insidious because they are so reasonable sounding, and they make sense. However, you need to be careful. Scams come in all shapes and sizes, and you need to carefully vet every “opportunity” that ¬†comes in your way.

(Photo: jepoirrier [7])