How To Protect Yourself From Investing With Scammers

Mike DeHaan: [0:01] Welcome to the collecting keys Friday focus. What is going on collecting keys listeners? Welcome to today's episode of the Friday focus. I'm Mike DeHaan. I'm here for my first show, actually, I think for a little bit. Think it's been a few weeks since I recorded one for you guys. If you are new to these episodes, this is when we do a deep dive onto a topic that we discussed on this week's episode or a question from a listener or something similar. So after the show that came out on Wednesday, we dove deep into scammers and some of the rise of scams and different things that are going on in the real estate industry. And I actually got a listener that reached out to me on Instagram, and they asked me, well, if I want to invest with somebody, you know, I wanna make a third party sound investment, how do I make sure that I do not get scammed? And what exactly does that look like? So I figured it was prudent to do a short episode where I just talk about some of the best practices that you can go through as a silent private investor if you wanna invest money with somebody. K? And, you know, obviously, nothing's perfect, but these are some of the basic guidelines that you can follow. So number one, first, make sure that you are only investing with people that you personally know or people that have like legitimate testimonials and people that vouch for them. K?

Mike DeHaan: [1:17] Ideally, the people that are vouching for them are people that you also know. You know, and realize that they're legitimate people. A scammer can go and get, you know, other peons that will go and make fake testimonials that aren't actually legit. So make sure that you actually know, you know, what the testimonier is saying, and that you know who that person is. Obviously, nothing is perfect. I mean, if you look at like the whole FTX thing that happened last year, that dude, before we stole like billions of dollars from everybody, he had like athletes and celebrities and all these people vouching for him, which made him look extremely credible. But obviously, that was fake. So, you know, keep your keep your alerts about you, but at least you wanna make sure someone has legitimate testimonials. That's better than having no testimonials, and ideally, it's someone that you know personally. K? That's an easy thing number one that you can start with. Second thing, make sure that you have a third party review all the investment documents if you aren't 100% sure what everything is. K? So if you do an investment, you should get a stack of documents sort of outlining what the investment is. I guess to say stack.

Mike DeHaan: [2:19] Sometimes it's short if you're doing just like a mortgage or bumps or a note or things like that. But if you're not positive what every single line is in there and what your recourse is with each thing, have somebody else that has no stake in the game look it over. That can be a lawyer. That can be a trusted investor friend that is much more seasoned. You know, that can be kind of anyone in between. Right? The key is you want someone that has no involvement in the deal, has no stake in you actually making the investment to be able to give you guidance. Because that way, if you decide not to do it, they don't really care. They just wanna help you out. Obviously, of course, this all to be said, don't invest in anything if there isn't a set of documents, even if it's your best friend. Stuff gets weird when things get challenging, and you always wanna make sure that things are legitimate when you are sharing money or you invest with other people. Alright. Third one. If you are loaning for a specific deal, meaning you're not putting money into like a debt fund or a syndication, make sure that there is a promissory note, a deed of trust, a personal guarantee, basically saying that the borrower will pay you back with their personal assets so they default, and that all of this is being managed by a third party title and escrow company or an attorney, and not just by like the money raiser. Right?

Mike DeHaan: [3:32] A fundraiser. So in the instance we talked about on the show with that Cash Flow Kings guy, basically what he was doing is he was giving people these documents, so it looked like a very legitimate transaction. But because there was no third party town escrow company that was actually recording the debt, he was just taking the money and not recording everything. Right? Or not not reporting anything, let alone everything. K? And so he would raise more money. He would pay off his previous investors. And he was just doing all the paperwork himself, and they even had copies of the documents. People were like, hey, you know, like, I I had a promissory note, and they're like, cool. Well, that wasn't tied to any property. So you're kinda SOL, because there was no checks and balances, and no one making sure that the actual process was being followed correctly. And I think in his instance, there was one house that he raised like over a million dollars, and had 47 different promissory notes for a house that was worth like a 150 k. Like, there's nothing there to even claim back at that point. They're literally just giving him money and he was using it to go and buy, you know, boats and go to, you know, get NBA courtside seats and buy a lake house and do all this other stuff.

Mike DeHaan: [4:37] Right? And this is a guy that had a very legitimate audience. He had a very loyal following who trusted him and he took advantage of that entirely. So, you know, make sure that the people that are pushing to the process through is not the fundraiser, but is a title and escrow company. When it comes to doing things like a fund, it's a little bit different because typically with a fund, you do wire money direct to the person. They are the one that facilitates the documents. But in those cases, that's why it's so much more important to make sure that if you're doing like a syndication, investing in a debt fund, different things, that you have a third party review the documents to make sure you fully understand what that all looks like then. And then the last piece of advice with all this is to make sure that you only invest money that you are willing to lose. Right? And I say willing, not like happy to lose, but willing to lose. Meaning, if it goes away, it's not gonna be like completely detrimental to you. Of course, you don't wanna lose money, you know. But even then, like aside from having to worry about scanners, deals do go sideways, money can disappear. This is especially something that's going to happen with people that invested with like multifamily syndicators in 2021 when rates were super low and prices were super high. There's a ton of people who are going to lose their ass with their private investment.

Mike DeHaan: [5:49] Because those people that, you know, led those deals, even though they were well intentioned, they knew what they were doing. All that equity is gone because all the value in the multifamily is gone as cap rates have collapsed and money's gotten more expensive. Okay? And that will happen. So always just make sure that you're only investing money that you, you know, will not be completely thrown out or completely destroyed if you lose it. And, you know, whether you're doing one on one investments such as this guy that was scamming was raising money for it, you're doing fun investments, the same principle applies. So I guess just to rehash those three things, three I guess the four main things, Make sure that you know the person personally, they have legitimate testimonials. Right? That's step number one. Step number two, have a third party review all the documents, specific hopefully, for somebody that's more educated than you, be that a lawyer or a trusted investor friend. And then thirdly, if you were loaning on a specific deal, like you were loaning to a flipper or like, you know, you were loaning like a single family home and you're the only person, make sure that you get a promissory note, deed of trust, personal guarantee, and that it is being managed by a title and escrow company or an attorney and not the fundraiser. So quick tips there. There is some extra work. Right? Even though they call it passive investing, the due diligence does take time.

Mike DeHaan: [7:05] It does take knowledge. And it's the way you need to protect yourself if you wanna do this seriously. Right? So it's very important that you, they truly, you know, follow the proper steps here. And really what it comes down to as well is just like, don't think that because someone has an internet platform that they know what they're doing and they won't steal your money. This goes to me included. Right? I hope that if we ever end up doing a deal, or you're ever giving me money for some reason, you know, I do have a debt fund, which we do take money from people for that. But if you do, if you ever look to invest with us with that, make sure that you, you know, understand the documents, you understand us, you understand what we're gonna do with it, and that you do actually trust us, and we have that statute of limitations there. Right? And so very, very important. And, you know, just realize that when stuff gets weird, k, there's gonna be more and more of these people that follow-up, and people use these media platforms as a way to gain additional leverage to steal money. Something that has been going on since the beginning of time, they sort of hide behind this expertise to make it easier to extract money from people. You know, you can look at like even going back to like snake oil salesman, you know, MLM marketers, televangelist, I think every sort of niche you can find, there's someone that has been in the quote unquote expert that can solve your problems and will use that expertise to kinda like hit you against yourself to get you to give them money. Right?

Mike DeHaan: [8:24] So there's always fishy people out there. Be smart. Watch out for yourself and your friends and your family, especially your older family, especially when the economy gets tight. People are gonna get desperate, and so it's gonna become more and more. Anyways, guys, hopefully, that's insightful for you. I appreciate you all listening. Shoot me a follow on Instagram at mike underscore invests. I always really enjoy connecting with everybody there. And as this stuff starts to get more and more prevalent, I'm gonna make a point of just calling people out with these, you know, scams and different things people are doing. You know, a, so they get put on blast. I have no problem putting people on blast and they're doing bad stuff. Also, two, I just wanna make sure that you all are being protected out there because, you know, even though there's criminals, we're not all bad. There are very legitimate ways to make money, and there's no reason that you should have your future hindered because someone else decided to take advantage of your own ignorance. So I wanna help you out as much as I can. But anyways, guys, hit me up on Instagram at Mike underscore Invest and leave us a five star review or listen to your podcast.

Mike DeHaan: [9:20] I'd greatly appreciate Thanks, everybody. Talk to you next week. Thanks for listening to this collecting keys Friday focus. Be sure to subscribe wherever you listen to your podcasts.