Have you been scammed on a "Turnkey" Rental Property Investment Scam? Here are some thoughts

 I have been handling consumer law cases for over 30 years, and just recently I received my FIRST complaint about a "turnkey" rental property Investment.  I did some initial checking and my first impression is there maybe avenues where an attorney can help you get your money back.  

The first thing you have to understand is that whenever somebody is selling a security, and for our purposes think of "security" as a passive investment, both the person selling you the investment and the investment itself must either be registered or covered by an exception.  Now there are some very broad exceptions.  The smaller the investment and the lower the number of people to whom it is offered, the more likely that it is covered by an exception. Because both federal and state law apply to securities offerings, the offering must comply with both state and federal law to be fully exempt.  

In general a sale of a fee interest (traditional property ownership) in real estate is not a security, but when that property is sold as an income-producing asset along with services in managing the property, that property might be a security.  

The current crop of "turn-key" property "scams" look more like a security than traditional real property sales, because the whole spin is to combine the purchase of the property with management services that make renting the property practical. Promoters advise that putting a rental property into your IRA is a great investment. The thing is, rental property that is actively improved or managed by the investor is not allowed to be in an IRA. That's what makes these operations look more like securities investments than a pure purchase of investment real estate.  

"Turn-key" property sellers and managers are not necessarily scams, but keep in mind, a lot of these companies own portfolios of properties that they also manage to make money. Are they more likely to sell you the turkey that is a money-loser, or the prime property that is a cash cow?  

If you find yourself victimized by a Turnkey property operation, and either you, the property, or one or more of the promoters is located in Indiana, we would love to hear from you.  If the transaction has nothing to do with Indiana, You can find an attorney in your state at the National Association of Consumer Advocates website www.consumeradvocates.org.  

More on Hometitlelock

I've gotten a couple calls concerning Hometitlelock since I wrote this blog post.  These people didn't read my post very carefully, because they thought I was Hometitlelock.  Not only am I not affiliated with them, I feel like I would be casting shame upon my family if I were.

You might be a victim of home title fraud, and you might be struck by lightning.  I suspect the odds of being struck by lightning are higher.  The due diligence procedures of banks and the requirements of notarization suggest that it is extraordinarily unlikely for you to be the victim of home title theft. 

Attention College Network students: Is your credit union being straight with you regarding your obligations

I have written before about the problems that  The College Network has gotten into. The College Network arranged for its students to finance their contracts through various credit unions. The primary Credit Union appears to have been Southeast Financial Credit Union, but others include We Florida Financial Credit Union and City County Credit Union, Lifeway Credit Union and maybe others.

Despite repeated efforts to shut down this company by government agencies, The College Network is still doing business, still signing up new customers (victims), and still saddling these students with piles and piles of debt.  What these students are not being told is that they don't necessarily have to blindly keep paying on these long term contracts to avoid ruining their credit for years. If the contracts are illegal as the New York and Indiana attorneys general have asserted, then claims and defenses that could be raised against The College Network can also be raised against the companies financing the contract. Moreover, the illegalities can be used. Please call my office at 317-662-4529 or find a NACA attorney in your area at www.consumeradvocates.org.

Beware of Pension Factoring Ripoffs

I've been a lawyer for 27 years, more than half my live.  I've handled over 100,000 intakes in that time. Recently I was approached regarding a a type of transaction that I had never seen before. It involved pension factoring and a company called Voyager Financial Group, LLC.  Voyager approaches people who need money and have an income stream from a pension fund or something similar, and they offer their services as brokers to get the person cash up front for his or her pension scheme. the pensioner pledges the income from the pension as security for the advance. It seems obvious to me that this is a loan by any other name but so far Voyager and like companies have dodged scrutiny as lenders.  Voyager has run afoul of securities commissioners in several states because Voyager does not put up its own money, it recruits investors to buy the income streams. Because this is passive income for the investor, it is a security and should be registered.

The best mainstream journalistic article that I've seen on the subject is this one from the New York Times.

In the business world, factoring is common. The most common factoring is accounts receivable. Another type of factoring involves payment in advance for structured settlement payments.  The intermediaries in these transactions can potentially rip off both the investors and the person obtaining the lump sum, a/k/a the borrowers.  The implied interest rates in these deals are quite high. From what I've seen the rates exceed the 21% maximum legal rate for mainstream lenders in most states.  It's not such a great deal for the investor, either. The pensioner can actually cut off the stream of income. I think it's arguable whether these contracts are ever legal due to lack of disclosure on the consumer side and lack of registration of the various lenders and intermediaries.

If you have a problem with a pension factoring company, or of you sold pension payments, especially if you are getting collection letters relating to the pension assignment, I am interested in hearing from you. Call me at 317-662-4529. If you are not in my area (Indiana), I will try to link you up with a NACA attorney.