How do you spot a bad land deal?

By Kelley Keehn

Canadians love land deals but what if it’s not a deal at all and instead a scam?

Unlike the often precarious stock market, you can touch, feel and see real estate.  Plus, you have a degree of control.

But what if what you’re seeing isn’t real, the documents you signed are bogus and the promoter of the “deal” is a crook?

In August of 2014, Global News’ 16 x 9 produced and aired a scathing scheme titled, What the Preacher Promised.

The exposé revealed that the Harvest Group of Companies, created and promoted by pastor Ron Aitkens, absconded with over $500 million in Alberta investors’ life savings.

A young man, appearing in his mid to late thirties on the exposé, named Kris, was featured as he told the story of how he was ripped off of the “Alberta dream” as he put it.  Everyone was cashing in, he could see the growth in real estate and didn’t want to miss out.  He invested his life savings and it’s all gone.  Now, his wife has been diagnosed with terminal cancer and he doesn’t have the money for her cancer fighting treatments.

Fighting back tears on camera, Kris talked about the trust he had for the pastor (there were other pastors promoting the Ponzi scheme-type investment on Ron Aikens behalf) that was selling him a piece of the “dream”.  Even though the story showed a disclaimer of risk on the documents in large point font, Kris signed.  When asked why this didn’t trip any alarm bells for him, he said that he asked the promoter and was again reassured that there was no risk to his investment.  So, he ignored what he read and signed on the bottom line anyway.

Kris’s story is tragic, even heart breaking for him and his family.  As a young man, it’s my hope that he’ll recover from this financial disaster and his wife will get the treatment she needs.  But this Ponzi scheme and Ron Aitkens didn’t just stop at attracting investor’s life savings – and many of those elderly Albertans – he also encouraged many to go so far as to mortgage their paid off homes.  Not only did those swindled lose everything, they have to pay back the borrowed funds.

To be sure there are many solid, reputable real estate investment opportunities and promoters.  However, there are new fraudsters popping up all the time with investment opportunities that simply aren’t legitimate.  Here’s a list of red flags to help you spot the offenders:

Red Flags That A Real Estate Investment May Be A Scam

•         No risk

•         High returns

•         You need to bring someone new in to get your money out

•         Urgency to sign now

•         Little to no paper work

•         Sparse promotional materials

•         You were referred by a friend

•         Little to no investment counsel

•         Encouragement to invest your life savings or borrow money to invest

No matter what you’re investing in, be sure to hire an independent professional such as a lawyer, chartered accountant, or fee-only financial planner, to provide you with a second opinion.  For the few hundred dollars invested in their time, you could potentially save thousands of dollars (or much more).  Just be sure to choose your own professional and not one the promoter of the investment is recommending.  Lastly, check with your provincial securities commission to see if the promoter or investment is registered and if there are any outstanding complaints.  A Google search of the investment name followed by the word “scam” can reveal wonders as well. 

When it comes to protecting your hard earned dollars, spend the time upfront researching any investment before you agree to anything.  The alternative of trying to recoup funds from a fraudster yields little if anything and takes a tremendous amount more of your time and money.

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Information for this article was excerpted from the book, Protecting You and Your Money; A Guide to Avoiding Identity theft and Fraud, published by the Chartered Professional Accountants of Canada.

Kelley Keehn is a two-time award-winning author of nine books, a personal finance expert, & speaker.  You can find her at www.kelleykeehn.com and on twitter @KelleyKeehn.

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