How to Identify a REIT Scam

A Real Estate Investment Trust, commonly referred to as a REIT, can be a nice investment, adding value to a diversified portfolio. Both commercial and residential real estate have been increasing in value for decades and should perform well in the future. As a short-term investment for quick profits, a REIT should be considered carefully. REITs have been used to scam investors not proficient in the real estate market.

Instructions

1. Investigate the history of a REIT before you invest. Check out its performance on the stock market over a period of time. If it is privately held, ask for statements ranging over a couple years.

2. Know the principals in the company. Check out the executive officers of the trust in an Internet search engine. Read news articles in which they have been mentioned.

3. Tell your accountant or tax adviser about your interest in a REIT for investments purposes. She can explain the tax advantages or problems associated with the losses and profits, which have different rules in most cases.

4. Ask your attorney to review any paperwork before you sign it. If your attorney is not familiar with the real estate market, ask for a referral. An attorney who has worked with investors who have participated in scams will know what kinds of language and issues to be on the alert for.

5. Ask questions if you do not understand any part of a deal. A scam artist knows how to cloud a contract with industry-specific language that can obscure the reality.

6. Beware of any deal that sounds too good to be true. While REITs can provide solid profits, they also attract dishonest types who can phrase an offer to make it sound irresistible.