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How to Avoid an Investment Property Scam

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This article was first published in May 2006 as a warning to potential investors to take care when committing to property investments. Hundreds of investors actually signed up with us, and are taking part in a joint legal action, but many more, including many of the leading banks, some now in government hands, went on to get involved in hundreds more bad deals, and are counting the costs in millions!

For those of you that saw the Sunday Times front page article ‘Buy To Let Property Fraud Hits Thousands’ the week before Christmas 2008 will have seen the latest results of that misdemeanour, and the losses and heartaches this widely spread property fraud had on investors an f their families.

To many people, taking the plunge, and investing in property for their future is a major leap of faith. Imagine how they must feel, if their investment turns out to be an investment property Scam?

Is there a way out of any Investment Property Scam?

The first thing to realise is that if you do feel you have been conned, you are probably not the only one. It may feel like it, and you may feel alone, stupid, cheated, and angry or embarrassed – some of the common emotions felt at this time.

But, these are the emotions that developers with crooked minds will encourage you to think. They hope that you will feel ‘suckered’, and just don’t want to tell anybody. In fact, with a clever scam, there may seem to be nothing to tell anyway, apart from your gut instinct, until you start digging.

But inertia is just what these criminals (and they usually are criminals) want you to think. In these circumstances, you must not hold it all into yourself. You must try and find if other people have been duped into a similar situation. You never know, you may be one of ten, twenty or hundreds of similar souls, and if you can find, and become identified with such groups you will stand a far greater chance of getting retribution, believe me.

I got caught up in such an investment property scam about 18 months ago (I know – gasp – shock – horror – and I sell investment properties!). For some months, I thought I was going crazy, I could not understand why I could not get tenants in at anywhere near the prices I was expecting, or even get tenants at all. This was the first revelation, as I had been promised that the properties would have been fully tenanted on completion. Well, at least, that’s what the brochures said, as well as the sales manager at the presentation I attended. And I had bought a number of these ‘beauties’ each supposedly fully tenanted and making me around £500 each per month rental surplus.

Then I started to investigate the situation more thoroughly, and I soon identified the problem. It’s a down and out highly complex investment property Scam!

So how did I, an experienced property investor, and a reseller of investment properties – get involved in an investment property scam?

I’ll tell you how – perhaps Criminal Intent?

What I have done is to chronicle the events that actually took place with my investments, of which I have since found out there were well over 100 similar incidents.

Before I went into this investment, or even recommended them to others, which consisted of a number of refurbished houses converted into HMO’s for students (Houses of Multiple Occupation) I investigated the company thoroughly. (Note the company and location of these houses is not mentioned in this report for legal reasons). I checked out at least 6 of their property conversions, spoke to their rentals people, and spoke with several existing investors. I took my business partner at the time with me to check out my findings. I was also comforted by the fact that these people were spending (and still are spending) a lot of money in the big national newspapers (Sunday Times, Telegraph, and so forth), and had produced a whole range of glossy brochures backing up their claims.

Some of their larger off-plan developments were also being featured in a two-page spread in one of the UK’s leading property magazines. Not only that, but they had (and still do have) very large exhibition stands at a number of the leading UK Property Shows.

Everything seemed to stack up, so I bought a number of them, and encouraged my friends, close family, and business colleagues to buy some also. I paid my reservation fees, and just settled down to wait for these to be completed, and to start generating some surplus cash every month.

The first event in the chain of things was that the houses were very late in being completed, so we were in danger of losing the student intake for autumn 2005, but the investment still seemed quite good, and anyway we had all exchanged contracts by then. And, of course, we all thought we had at least an 11% equity holding in each property, plus the usual growth of 4-6 % from last year. Also, when asked if we could inspect them prior to completion, we were told – “Sorry, as you have tenants in them, you have to give 48 hours or more notice”. Then when we did try for appointments nobody could find the keys… Where were my alarm bells I hear you ask – Obviously on Silent Mode!

But then the dirt really started to rise to the surface…

These houses were all sold under the premise of ‘All contacts for services under one roof for the investor – Use our Services for Sales, Recommended Solicitors, In-house Brokers, mortgages, Tenancy Management from our Own Company’ – you know, a really good packaged deal for the armchair investor.’

Issue 1 was that the houses were not fully tenanted on completion, and in a lot of cases, the tenants seemed to ‘melt away’ after contracts had been signed. So much for the promises made in the developers’ glossies that tenants would be in place before completion, with cross-guarantees so that there would be virtually no void periods, no issues with rent, as if one tenant failed to pay, the cross guarantees meant that the other tenants would be liable.

Also, in some cases, (not with mine luckily) no renovation work had been carried out at all, and the developers then had the cheek to ask for £3,000 per property to fix those that had not been done. Then, major issues with the building work started to surface. Basements would flood, not due to rain, (although this did happen on a number of occasions where the basements had not been ‘tanked’ correctly), but due to faulty plumbing, But if course we had a 12 month warranty contract – Right? Wrong?

Even after constant phone calls and emails, the management company failed to send us proper records, and they did not keep us informed of maintenance issues, tenants leaving, tenants not paying rent on time – all the sort of standard things one was used to expect from a ‘proper’ management company that charged 10% of the rent as fees.

And the hassle I had moving the management agreements to another company is another story for another day when it can be told.

Ok, so, this just seemed like rogue building work and an outright total lack of proper management by the department handling the tenancies. Not the sort of service to be expected from a firm carrying out so much nationwide marketing, but of course, being of such a high profile firm, you would have thought they would have fixed the issues. Right? Wrong!

So because of all these issues, I had by now started to do some very intensive investigation into this company, and the methods being used to package the sale of these houses.

It then transpired that most of these houses had been bought by the developer some three to four months prior to selling them, some the previous morning, for about £90,000 – in the developers words – derelict houses that were totally gutted; 3 bed properties that had basements opened out, and or roof conversions done, so adding as many as 2, 3 or even 4 more bedrooms, and supposedly converted to the highest of standards for HMO purposes, and these were sold to us for around £249,950 up to £325,000 and higher.

Ding Ding Ding – Alarm Bells…

Why were we quite happy to purchase them – because they all came with RICS (Royal Institute of Chartered Surveyors) valuations on the property value and the anticipated rental incomes.

All of which matched the developer’s claims.

But when we noticed that several investors from other groups were having some of these similar houses repossessed – as they were not getting the rent, and consequently could not afford the mortgage, and the valuations were all coming in at around £80,000 to £100,000 BELOW THE MORTGAGE VALUE!

Our own investigations then uncovered that many of these properties had been valued by the same firm, and for comparison, they had used properties by the same developer on the valuation form.

We have come across instances where the mortgages that were granted they :-

· Were not valid for multiple occupancy homes – so why was a loan granted?

· Would not have been granted had the banks known the properties were already tenanted, and not sold as vacant possession. So why was a mortgage granted?

· Would not have been granted if the valuation rental assessment was not realistic. So loans were granted on incorrect information. If the investor had put the rental figures in, they would have probably been done for mortgage fraud.

· Would not have granted a loan (especially interest only) if the true valuation figure had been known.

· Would not have granted 85% of the assumed value had they known a Gifted Deposit was being paid (along with legal and other fees by the developer). The solicitor was aware, as was the broker, so how come the lender was not informed?

Now, as I like to think of myself as a ‘savvy investor’, knowing that gifted deposits, cash backs etc happen and quite often jump start the property market on the move, I had told my solicitor(s) what the side deal was, the broker told me what the deal was, so no problem right?

Wrong… I then find out that neither the solicitor(s) nor the broker had informed the lender.

Somewhere along the lines, something was wrong here.

The question is – Was it the fault of:-

· The Developer?

· The Solicitor?

· The Broker?

· The Investor?

In a society where regulations covering solicitors, brokers, mortgage loans, and valuers seem quite strict, I must say I think something is awry here, where the hapless individual investor can walk into such an unregulated trap!

If you feel you have been involved in such an investment property scam, and would like to see if there are others in the same boat, please visit my blog where you can voice your opinion, and even add your name to a structured list if you want so we can build up a database of like events that could be easily analysed to spot trends, or passed to ‘Watchdog’ for instance.

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Source by Geoff Morris

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Where to Find Those Efficient and Hardworking Affiliates?

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Everyone wants a hardworking affiliate, employee, associate, partner, or even spouse, and why not? It’s the next best thing to doing the work yourself. However with the massive outbreak of work and income opportunities available online, how can you beat everyone else and find that one (or more) ideal person who will make your online business explode with success? Here are some of the most ingenious and uncommon ways to snag the idea affiliates for your affiliate program

Direct Sales Agents

Direct sales people are really one of the most enterprising, hard-working individuals in business. They mostly work on commissions or rebates and are willing to literally go door-to-door offering their products to anyone and everyone they bump into. Imagine how much easier their job would be if they could be an affiliate and simply work via the Internet and a mobile device or desktop.

Also, most direct sales people tend to carry more than one brand in their product arsenal so signing up as an affiliate would be almost the same type of work but using a different approach.

Colleges and Universities

Many college kids would be interested in a part-time income opportunity if it would mean funds to help pay for their education, loan, or partying. All you have to do is make sure to offer them products they can endorse as a student.

Freelancers

Did you know that the U.S. Census Bureau’s latest annual report show that 75% of U.S. businesses used freelancers in 2011? Freelancers earned a whopping US$990 billion in 2011 which is a 4.1% increase from the previous year. The only industries where the number of freelancers decreased were in insurance, finance, and construction. Most probably your affiliate program isn’t a part of these 3 industries.

Furthermore, online business and finance experts are predicting the growth to increase incrementally every year even with an economy that is improving. People just want income security and more control over their earnings. With the spate of lay-offs, it’s understandable why many would prefer to work as an affiliate than as an employee.

Scout For Them At Affiliate Conventions

There are annual affiliate conventions held in different cities around the country. You should try to catch one when it is held somewhere near your location. The average turn-out for these types of conventions has increased regularly over the years. Last year, many of them were sold out weeks before the event.

Advertise!

The US Census Bureau has said that as of 2012, 15% of Americans are poor, 43% of young adults depend on their parents to some extent for money. Even more surprising is that the median income of young adults in 1982 was $31,583 and last year it was $30,604 for the same age group! Income is dropping and people are looking for ways to earn additional income outside of their 9 to 5 jobs. That’s where you can come in playing the hero and helping others realize their dream income.

Finally, go online and talk about your product. Make the affiliate marketers come to you and have the luxury of picking the best candidates. You will need some help in marketing your affiliate program so target a marketer who’s experienced in affiliate program and SEO.

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Source by Lina Stakauskaite

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Recession Is Here… Six Costly Mistakes Home Sellers Make During Recessions And How To Avoid Them

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The U.S. is officially in a recession. What is a recession? A recession is a business cycle contraction or general economic decline due to significant drop in spending and other commercial activities. Most pundits and politicians will blame Covid-19 crisis for the recession, but even pre-Covid-19 the proverbial writing was on the wall.

The U.S. had over 120 months of economic growth, which was the longest expansion in the modern history. Other indicators, such as negative yield spread on treasuries (long term bonds having lower interest rates than short term T-notes), were pointing to an imminent change of the economic cycle and an impending recession. The only real question was: when and how bad?

Then Covid-19 came… If the cycle was going to change anyway, Covid-19 acted as a huge and unexpected accelerant to make the recession much more immediate and severe.

Inevitably during recessions all classes of real estate, including residential homes and condominiums, will be negatively impacted as lower consumer spending and higher unemployment rates affect real estate prices and marketing times.

Here are the six costly mistakes home and other real property sellers make during recessions and how to avoid them:

Mistake #1: This will pass and real estate market will be hot again soon

First thing to remember is that real estate cycles are much longer than general economic cycles. Even if the general economy recovers, which eventually it always does, a typical real estate cycle takes as long as 10 to 15 years. The cycle has four key stages: Top, Decline, Bottom and Rise.

Let us consider the last real estate cycle, which lasted approximately 14 years:

  • 2006 – Prices hit the Top
  • 2006 to 2012 – Prices Decline
  • 2012 – Prices hit the Bottom (Trough)
  • 2012 to 2019 – Prices Rise*
  • 2020 – Prices hit the Top
  • 2020 to? – Prices Decline

*NOTE: In 2016 the national residential real estate price index reached its pre-recession 2006 peak levels. It took 10 years for the real estate market to recover.

The way to avoid this mistake is to recognize that real estate cycles take years to run and plan accordingly. Additionally, nobody knows for sure when the prices will hit the top or bottom until after the fact.

Mistake #2: Low interest rates will make the economy and real estate market rebound

Between 2006 and 2011 the interest rates (Fed Funds) were continuously cut by the Federal Reserve Board and went from low 5% to almost 0%. However, that did not stop the real estate recession and depreciation of property values.

Undoubtedly, low interest rates made the economic decline and real estate recession less severe and saved some properties from foreclosures, but it still took six painful years for the real estate market to hit the bottom and then four more years for the prices to go back to their pre-recession levels.

Some markets had never fully recovered. For example, residential home prices in some parts of California, Arizona and Nevada are still below their 2006 highs.

To avoid this mistake, one needs to realize that although low interest rates help stimulate the economy and the real estate market, they do not cure them.

Mistake #3: I don’t need to sell now, so I don’t care

If you do not need to sell until the cycle plays out, which typically is over ten years, then you will not be as affected, especially if you have a strong equity position, limited mortgage debt, and solid liquid assets.

However, it is good to keep in mind that “life happens” and either professional or personal circumstances can change and we may need to sell property before the downturn runs its course.

Furthermore, if a property has a mortgages and its value declines to the point being “upside down,” meaning the mortgage loan balance exceeds the value of the property, then the options of selling, refinancing or even obtaining an equity line of credit, will be significantly limited.

This does not mean that everybody should be rushing into selling their real estate if there is no need to do so, just keep in mind that circumstances may and often do change and property options will be affected, so plan in advance. As one wise proverb says: “Dig your well before your thirst.”

Mistake #4: I’m selling, but I won’t sell below my “bottom line” price

This is a common and potentially very costly mistake. Generally speaking, every seller wants to sell for the highest price and every buyer wants to pay the lowest price. That’s nothing new. When selling real estate, most sellers want to achieve a certain price point and/or have a “bottom line.”

However, it is important to understand that the market does not care what the Seller, or his/her Agent, think the property value should be at. The market value is a price a willing and able buyer will pay, when a property is offered on an open market for a reasonable amount of time.

Overpricing property based on Seller’s subjective value or what is sometimes called an “aspirational price,” especially in a declining market, is a sure first step to losing money. When a property lingers on the market for an extended period of time, carrying costs will continue to accumulate and property value will depreciate in line with the market conditions.

Additionally, properties with prolonged marketing times tend to get “stale” and attract fewer buyers. The solution is to honestly assess your selling objectives, including the desired time-frame, evaluate your property’s attributes and physical condition, analyze comparable sales and market conditions, and then decide on market-based pricing and marketing strategies.

Mistake #5: I will list my property for sale only with Agent who promises the highest price

Real estate is a competitive business and real estate agents compete to list properties for sale which generate their sales commission incomes. It is not unusual that Seller will interview several agents before signing an exclusive listing agreement and go with the agent who agrees to list the property at the highest price, often regardless if such price is market-based.

Similarly to Mistake #4, this mistake can be very damaging to Sellers, as overpriced properties stay on the market for extended periods of time costing Sellers carrying expenses such as mortgage payments, property taxes, insurance, utilities and maintenance.

Furthermore, there is the “opportunity cost” since the equity is “frozen,” and it cannot be deployed elsewhere till the property is sold. However, the most expensive cost is the loss of property value while the real estate market deteriorates.

During the last recession, we have seen multiple cases where overpriced properties stayed on the market for years and ended up selling for 25% to 40% below their initial fair market values.

The solution is to make sure that your pricing strategy is based on the market, not empty promises or wishful thinking.

Mistake #6: I will list my property only with Agent who charges the lowest commission

Real estate commission rates are negotiable and not set by law. A commission usually represents the highest transactional expense in selling real properties and is typically split between Brokers and Agents who work on the transaction

Some real estate agents offer discounted commissions, in order to induce Sellers to list their properties with them. But does paying a discounted commission ensure savings for the Seller? Not necessarily.

For example, if the final sales price is 5% to 10% below property’s highest market value, which is not that unusual, due to inadequate marketing, bad pricing strategy, and/or poor negotiation skills, it will easily wipe out any commission savings and actually cost the Seller tens of thousands of dollars in lost revenues.

The solution is to engage an agent who is a “Trusted Advisor,” not just a “Salesperson.” A Trusted Advisor will take his/her time and effort to do the following: 1) Perform Needs Analysis: listen and understand your property needs and concerns; 2) Prepare Property Analysis: thoroughly evaluate your property and market conditions; 3) Execute Sales and Marketing Plan: prepare and implement custom sales and marketing plan for your property; and 4) Obtain Optimal Results: be your trusted advocate throughout the process and achieve the best possible outcome.

Finding such a real estate professional may not be always easy, but it certainly is worth the effort and will pay off at the end.

In conclusion, this article has outlined six costly mistakes real estate Sellers make during recessions and how to avoid them. The first mistake is not understanding that real estate cycles are long and take years. The second mistake is a misconception that low interest rates alone will create a recovery. Another mistake is not realizing that circumstances may change and not planning in advance. Mistakes number four, five and six pertain to understanding the market value, proper pricing and selecting the right real estate professional.

By understanding and avoiding these mistakes, real estate Sellers have significantly better chances of minimizing the negative impact of a recession while selling their properties.

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Source by Robert W. Dudek

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Useful Tips To Build The Best Gaming Computer

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Every gamer will want their computer to be the best gaming computer among their peers. Sometimes, with a little knowledge and tips and tricks, it is possible to build the best gaming computer and show it off to your peers. This article will show you how:

1) You can’t get the best gaming computer from computer retailers

If you want to get the best gaming computer, you have to build your own. Different gamers have different requirement for their gaming machine. Unless you are willing to pay a high price, you will not be able to buy a commercial computer that fulfills all your gaming needs. The only option you have is to build your own gaming computer.

2) You don’t have to be rich to build the best gaming computer

It is not necessary to burn a hole in your pocket to build the best gaming computer. With some due diligence, do some market research and compare prices around the marketplace. Merchant such as TigerDirect and NewEgg give regular discount to their products and you could save a lot of money if you catch them during their promotional period.

3) Most expensive parts do not have to be the best part

Sometime, the latest model or the most expensive model does not have to be the best part for your computer. It requires various components to work together to form the best computer system. When choosing a computer part, what matters is how well it can integrate with the rest of the components. Compatibility is more important than individual performance. What use is there if you spend lot of money on the latest quad-core processor and find that your motherboard doesn’t support it?

4) You don’t need to change the whole PC to own the best gaming computer

It is a misconception that you have to change the whole gaming machine to build the best gaming computer. If you already have a good barebone system, what you need to do is to upgrade the necessary parts and your gaming computer can roar back to life instantly.

5) Brand is important

Unless you want to see your computer system malfunction every few days, it is important that you purchase the parts from branded manufacturers with strict quality control. Motherboard brand such as Gigabyte, ABIT, ASUS are some quality brands that you can consider

If you follow diligently to the tips stated above. You will be on your way to build the best gaming computer. While price can be an issue, it is better not to scrimp on important computer parts such as motherboard, CPU, RAM and graphics card as it will cost you more to upgrade in the future.

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Source by Damien Oh

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