When it seems too good to be true

A client called today upset about a real estate investment that went from bad to worse. It could easily set him back to zero net worth or worse. We’ve worked on preventing him from making major financial mistakes and this was a clear ‘fail’ in our financial planning work together.

When he told me about the purchase last year, I was surprised. He did not speak with me about it in advance, perhaps because I might talk him out of doing it. From his perspective, everybody was making money in real estate and this deal seemed too good to pass up.

When he told me the details, I was immediately skeptical and said that it does not sound right. I’ve been a real estate investor for over 40 years, and I tend to rely on both financial ratios as well as intuitive ‘feel’ of a project. Nothing in this deal seemed right. I urged him to get every document to me for review; I offered to verify every detail from the validity of the address, the deed insurance, leases, etc. He did not.

I still don’t know the full extent of what is wrong. An attorney will be involved now. But there is a good chance that he was the victim of a coordinated scam and will lose all of his investment.

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