Real Estate Experts Share How to Avoid Cunning Con Artists in the Investing World

You’ve seen the claims that real estate investing can lead to life-changing financial opportunities, along with the critics who say it’s all a scam.

So which is it?

With vocal groups firmly seated in each camp, the reality is far from simple.

You probably know someone personally who has amassed tremendous wealth in real estate, and more than likely, you probably also know at least a few people who have been suckered in real estate in some way, and either made nothing, or worse yet, lost their entire investment.

The truth is that while there is tremendous opportunity in real estate, there’s also tremendous risk. Both in the assets themselves and in the people involved.

From a technical perspective, there’s a lot that goes into a real estate investment. You have to understand all of the legal and financial terminology, and how they apply to a deal, the federal and local laws that govern real estate transactions, and the financial metrics that determine whether a particular asset is a good investment.

There’s a lot to learn here in order to be successful, but that’s the easy part of the equation.

The hard part of the equation is evaluating the people involved in an investment. This primarily includes buyers, sellers, lenders, and partners, but anyone involved in the transaction has the potential to rip you off, and there are several different ways this can happen.

Shady Sellers Who Misrepresent a Deal

If you’re not handy, you probably don’t know how to identify hidden problems in a property. If that describes you, you’re not alone. According to research from equipment rental company BigRentz, 38% of Americans are unable to fix common household maintenance issues. This also means they don’t know what to look for in a property they’re considering purchasing.

It’s true that federal seller disclosure laws exist and they apply to all real estate transactions, but that doesn’t help if the seller doesn’t know the problem exists. And let’s be honest, as long as there’s no documentation, it’s easy for a seller to simply say they didn’t know. Plus, even if they do know and lie about it, you still have to take the matter to court, and we all know how costly and time-consuming that can be. During that time, you’re still paying the mortgage and often unable to rent the property out or resell it.

Damon Remy, a real estate investor with over two decades of experience, says, “The most dangerous part of a deal isn’t the property — it’s the story that sells it. If you’re not tracking the facts, sellers will fill in the blanks with fiction. Hope is not due diligence, and excitement is not a strategy.”

Remy runs the real estate investing CRM, REI BlackBook as well as a real estate investing mastermind group, and he analyzes thousands of opportunities every year. Most, he says, are simply not good deals.

And this just addresses the technical issues. It gets more complicated when you get to the strategic issues.

What if you purchased a property with the intent of rezoning it for a different use because you were convinced by the seller that it could be done, only to later find out there’s no way to get it zoned for your intended use? Or maybe the seller misrepresented the foot traffic in that area, local growth projections, or a significant business moving into the area. Now you’ve got a property that may not work financially, making it a liability instead of an asset.

On one hand, this is a classic case of “buyer beware,” but on the other hand, it’s often easy to fall into the trap of treating what the seller tells you as a fact because they’re typically a local who understands that area. You’re already excited by the opportunity, so when they start telling you about all the ways the deal will become even better, it’s common to see dollar signs.

Ruthless Buyers Who Take Advantage of You

While risks are most common and typically bigger on the buying side of the equation, you’re still not in the clear on the selling side.

The truth is that a clever investor can convince a less experienced investor that a property has problems that may either be exaggerated or completely fabricated, leading to a drastically reduced sale price.

It’s critical to understand the true value of your property so that when a potential buyer proposes something that doesn’t align with that, you’ll immediately recognize that it’s an attempt to get one over on you. And be aware of some of the tactics unscrupulous buyers will use to squeeze a lower sale price from you, such as using time pressure. For example, a common tactic is for a buyer to back out of a deal at the last minute to create more leverage to renegotiate. Often, when a seller sees their deal falling apart at the last minute, they will make concessions they wouldn’t otherwise be open to.

Remy says, “We’ve seen buyers lowball, stall, and sabotage just to squeeze out a few extra bucks. If you don’t know your numbers, you’re not negotiating — you’re just hoping they play fair. And in this game, hope gets you burned.”

Fear of loss is an incredibly motivating psychological phenomenon, and even when you’re prepared for it, the effects can be profound.

And the negotiation is just part of the bigger picture. You also need to pay close attention to the sales contract to ensure it aligns with the terms you’ve negotiated. Shady investors have been known to slip things into the contract, hoping they would go unnoticed, and often they do exactly that.

It’s not enough to just review the contract yourself though, because the language is often disguised in complicated legal terminology, especially if a buyer is trying to hide things. Experts recommend that the sales contract be drafted on the seller’s side to avoid this.

Just like on the buying side, the selling side of the equation is riddled with landmines, and if you don’t know what to look out for, it’s easy to step in the wrong place and create a massive problem for yourself.

Plotting Lenders Who Set You Up for Failure

As traditional home buyers, the lending process is pretty straightforward. During the mortgage process, you’ll fill out your application, provide all of the necessary documentation, and the lender will clearly explain the terms of your mortgage. This is all heavily regulated by the federal government to ensure fairness.

When it comes to lending for real estate investing, that’s not always the case.

A traditional mortgage follows a very specific structure with standardized terms. Mortgages for real estate investing, on the other hand, often fall far outside of these norms.

There are specialized loans, called DSCR loans, for example, designed specifically for investors. They come with significantly different underwriting guidelines and more flexible, but also more aggressive terms that are more suited to the complex world of real estate investing. They also lack many of the protections that traditional funding offers.

Things get even more complicated when dealing with private lenders. Each private lender will have their own unique approach to structuring a mortgage, and the terms are often far more aggressive and always in the favor of the lender.

And both are always more expensive than traditional funding, with significantly higher interest rates, as well as something called points, similar to an origination fee. If you don’t know what you’re getting into, it’s pretty easy to agree to a loan that you can’t afford.

While there is some degree of protection in place for home owners who fall behind or get into a mortgage that is deemed predatory, no such protections exist for these specialized types of loans. Unfortunately, some less than ethical lenders use this to their advantage by lending on unfair and unsustainable terms in an attempt to create a scenario where they can foreclose on the property when the investor falls behind, reaping a windfall profit.

Mortgage expert with Loanoligy, Ashley Herrera, says, “Not everything is what it seems when it comes to lending. There are a lot of people in the funding industry who are operating independently and aren’t licensed in any way. They’re basically just connectors, bringing borrowers and lenders together and collecting a fee in the process.”

Herrera is also a TV star who has been featured on multiple real estate reality TV shows to share her mortgage expertise with audiences.

While not being licensed isn’t necessarily an issue, it does mean there’s no real oversight, and it’s much more difficult to seek recourse in the event that something goes wrong.

Herrera says that one of the biggest red flags to look out for is lenders asking for upfront fees.

“Early in my own career, I had some bad experiences with unethical lenders, and something I saw in almost every single instance was some sort of upfront fee. They might call it an application, underwriting, commitment, or review fee, but the common denominator was that they asked for money upfront, often to the tune of thousands of dollars. And once they collected this fee, they would disappear. Legitimate lenders don’t do this. While they may charge various fees, they will be rolled into the loan to be paid over time along with the principal and interest, or paid at closing,” she explained.

That’s why it’s so important to get referrals to trusted lenders. It’s also critical to understand exactly what you’re agreeing to. That’s where experience comes in, but if you don’t have that, it’s wise to seek guidance from a reliable mentor to help avoid getting into a mortgage that can put you into a precarious financial position. Committing to a bad mortgage is bad enough on its own because it can suck up valuable capital, but committing to one that eventually leads to foreclosure can damage your credit in a way that hinders you for years to come.

The Partners Who Aren’t

As the old saying goes: Who needs enemies when you have friends like these?

One of the most common cons in real estate is the seemingly well-intentioned partners who are actually just looking for an inexperienced target they can con for a quick and easy profit.

More often than not, they present themselves as coaches, offering to teach you the ropes in exchange for a cut of the deals you bring to the table. They will typically teach you the basics, sometimes for free, other times for a fee, with the intent that you’ll beat the streets to find the hidden gems that aren’t listed in the MLS system. These are known as “off-market” deals and can be incredibly lucrative under the right circumstances.

Remy explains, “Real estate can absolutely change your life — if you do it right. But it’s not a get-rich-quick game, no matter what the guy with the rented Lambo says on YouTube. There are great mentors out there, but the real pros won’t pressure you or promise easy wins. Play the long game. Trust, but verify, and then verify again.”

One of the most common tactics they use is to simply cut their less experienced partners out of the deals they bring them. Sometimes this comes in the form of clever but manipulative contractual strategies, and other times, through brute force.

Veteran real estate investor, Tatiana Zagorovski, recounts a situation she got sucked into early in her own career.

“I met a woman named Lena Meadowcroft through a mastermind group I was a part of, and she proposed a joint venture where we would collaborate on an investing opportunity I was working on. She was a more experienced investor and was carefully vetted by the group’s founders, or so I thought,” she explained.

In February 2022, Zagorovski and fellow investor Lena Meadowcroft teamed up with the intent that Zagorovski would enter as an equity partner to acquire, renovate, and flip a property together.

“That was a huge mistake,” Zagorovski said.

The initial strategy was to renovate and resell the property, however, by April the partners shifted their approach to operate the home as a short-term rental with plans to later refinance and recover the investment. They failed to put the updated ownership and financial terms into writing, which ended up being a critical misstep.

Despite early collaboration, a failed refinance attempt in August of that year due to title issues overlooked by the mortgage broker led to the start of their conflict. Communication between the partners ended in mid-November when Meadowcroft stopped responding.

In September, the property title was transferred to Meadowcroft Properties LLC, where both parties were made managing members. However, without notice, Zagorovski was illegally removed from the LLC on January 31, 2023. This came shortly after a property sale contract was signed, an action that effectively excluded her from the transaction she had heavily funded.

“When the terms of our agreement keep changing, especially at the last minute, I should have become skeptical,” Zagorovski said. She went on to say, “I think my biggest mistake was trusting her too much and letting her talk me into using her title company and mortgage broker, without doing my own due diligence.”

Throughout the process, Meadowcroft redirected rental income into her personal account and failed to disclose offers on the property. A contract for sale fell through in March 2023 due to the buyer’s job loss, and Meadowcroft refused to accept a backup offer sourced by Zagorovski. Eventually, the property was sold in April 2023, but Meadowcroft never paid her for her share, despite Zagorovski finding the deal, doing most of the work, and funding most of the deal.

Meadowcroft’s failure to repay over $100,000 in documented investment eventually led Zagorovski to seek legal recourse. Attorneys from Armstrong Teasdale issued demand letters and attempted to obtain information from Meadowcroft and the closing title company, all to no avail.

In August 2023, Zagorovski initiated arbitration proceedings under the terms of the original joint venture agreement. Despite arbitrators granting Meadowcroft multiple extensions, she failed to respond, and her counsel later withdrew. On December 12, 2024, an arbitrator ruled in favor of Zagorovski. Due to Meadowcroft’s refusal to respond, Zagorovski was later forced to file a civil suit in the Thirteenth Judicial Circuit for Hillsborough County.

“Unfortunately, I overlooked a lot of red flags throughout the transaction. I dismissed my own intuition. I assumed this woman was in this group because she was legit and had been vetted. That was a huge mistake on my part. While I lost over six figures in this investment with Lena Meadowcroft, ultimately, I believe it made me a better investor because while costly, this experience taught me to trust my gut and always fully vet everyone I get involved with. You can’t blindly trust anyone, and that lesson was hammered home for me,” Zagorovski explained.

She has since found several other people who have been scammed by Meadowcroft and is currently in communication with local and federal law enforcement regarding a criminal investigation.

Real Estate Can Change Your Life, but You’re 100% Responsible for How It Does

True real estate experts warn that there are a lot of people promising to help you achieve financial success through real estate investing, and they agree it is absolutely possible, but they also warn that it’s up to you to do your due diligence to avoid getting scammed.