Q: I have recently started real estate investing. I have a friend who is a real estate consultant. She is not an agent.
She tells me that she knows of 2 in-town properties that are being sold by-owner. The properties have $50,000 worth of equity in them.
I have excellent credit and can get 100 percent financing on these properties. She says that after the closings, she will write me a $50,000 check for each property. At my request, she’s had both of these properties appraised and the appraisals appear to be legit.
Please tell me your thoughts on this as I do not want to be part of some illegal scam.
Q: I don’t understand how this deal works: You buy these properties by financing them for 100 percent, and somehow she gets the cash to give you $50,000 on closing? That sounds more than a little odd to me.
Since she is a real estate consultant, I don’t understand how she is compensated in this deal. But knowing how she is compensated is the key to understanding how the deal works.
While it’s entirely possible that she has found a seller who has underpriced his two properties by $50,000 each, from what you’ve described, this deal sounds like a scam.
In certain transactions, Federal law prohibits cash going outside of the deal. So if your “friend” the real estate consultant is somehow going to put herself in the middle of this transaction and write you a $100,000 check for the equity in these two properties, I’d say it all smells really fishy.
I’d also tell you that your friend isn’t acting like a friend — she might be looking out for herself.
For your own sake, please follow the money trail to figure out where the cash is going to and coming from. Is the $50,000 her commission on each deal and she is giving that money to you? Or is it part of a scam?. And, be sure to hire a good real estate attorney. As a real estate investor, you’ll need one, consultant or no consultant.