I have a daily Google Alert set for “real estate fraud” and I get at least 3 stories daily of some arrest, conviction or sentencing of some fraudster in various locations in the country.
As I read their stories, some seem to be true fraudsters with the intent to defraud, and some seem to be people that got into a jam and used opportunities presented to them to solve other problems in
their lives.
As real estate investors, we transfer money from one entity to another, for the purpose of a single project. However, if you are found co-mingling your funds with your entity and other entities’ m
oney, you are at risk of being accused of “misappropriating funds”. When I have a real estate project funded by an investor – I keep a separate bank account for each project. Not only is it easier for me to keep track of finances, makes the investor feel safer, but keeps me honest!
Back to the massive amounts of reports I read regarding real estate fraud, I’m often struck at how we, as investors, can fall into fraud to get out of a sticky situation. I’m not forgiving the behavior, but more wondering how and why this happens, and could it happen to one of us?