These days, the newspapers, online financial forums and other news outlets are full of stories about Ponzi schemes, fake investment deals and other sorts of scams. While many of the schemes involved high-tech companies or convoluted financial vehicles, the real estate world was not immune and many investors lost sizable amounts of money to real estate investment scams. 

Real estate has one fundamental advantage when it comes to investment deals – an actual property must exist. Here are four ways to use this fact to your advantage when examining any real estate deal that will help you avoid the untrustworthy sources:

Examine the Details of the Property

Ideally, a visit to the actual site of the property will deliver a vast amount of information. In the event that this is not possible, photographs, architectural plans, appraisals and, most importantly, county plat information will ensure that the property exists in the state described by the borrower. In addition, a proper title search will guarantee that the property is unencumbered by other liens and is actually being sold by the rightful owner. 

Understand the Risk/Reward Ratio

Successful – and relatively, stress-free – investing is a balancing act between the desire to make outsized returns while maintaining a tolerable level of risk. When a potential borrower or “real estate developer” promises a high return at low risk, a clanging alarm should always sound in your head. It is not that these deals do not exist. In truly outstanding deals, oftentimes the people involved keep it to themselves.

Visit Other Knowledgeable Investors

Find a forum like a private money lender where many knowledgeable and experienced investors congregate. Not only can you pick their brains for investment advice, you can watch their actions when it comes to certain types of deals. The deals presented on this platform are highly scrutinized as are the individual borrowers and lenders. It is highly unlikely that a real estate investment scam would pass unnoticed for very long in this venue.

Do Not Dismiss the Paperwork

Handshake deals are essentially a thing of the past. Formalizing any real estate deal with the proper appraisals, escrows and legal documents is one of the surest ways to avoid being taken by a scam artist. In many cases, the paperwork, itself, is too expensive for the thief to fund and the deal will die a quick death if you insist that they pay for it.