Top 5 Investor Traps for 2011
Advisors and their investor clients should be on the lookout for these popular scams. According to the North American Securities Administrators Association, here are five of the most common scams that advisors and their clients either managed to avoid or fell victim to this year.
Distressed Real Estate Schemes
How the scam works: An investment pool is created that contains properties that are bank-owned, foreclosures or pending short sales. For instance, investors are told that an entity will buy distressed properties on their behalf, rehabilitate these properties, find renters for the properties and remit a guaranteed profit of up to 30% on a monthly basis. Instead, the investors money actually is used for the entitys operations, to pay the personal expenses of executives and to buy properties for earlier investors.