For almost all business owners, dealing with commercial real estate is an inevitability. Aside from the fortunate few who work entirely from their homes, business owners will typically be involved with either renting or purchasing a piece of commercial real estate in order to conduct business. Commercial real estate can also provide lucrative financial opportunities for savvy investors. However, it is important to keep a watchful eye for scams and con artists, because potential renters and investors are common targets for exploitation.
Let the case of Karen Hanover serve as a warning. Hanovers operation couldnt have been more believable. Her professional-looking website and YouTube channel featured videos of a likable California real estate professional sitting in her living room, offering friendly and useful advice. In another video, Hanover stood on a stage, seemingly auditioning for a talk show on Oprahs television network while the audience cheered her on. To a casual observer, this was a woman who was on the fast track to success. When Hanover decided to offer commercial real estate investment opportunities with an advertised return on investment of 100 percent at a cost of $30,000 per investor her reputation drew in a number of interested parties.
Unfortunately for these people, Karen Hanover was not what she seemed. The investment opportunity was a scam. Hanover simply took hundreds of thousands of dollars and put them in her own pocket. Even the Oprah audition was faked simply the byproduct of clever editing. Hanover even posed as an FBI agent and threatened her victims once they started posting about their experience online.
How could the victims have avoided losing their money in such an investment? At the time of the investment, Googling the name Karen Hanover yielded nothing but positive results that seemingly reflected well upon the scam artists reputation. Simply searching for information on her would not have helped the victims. Instead, they should have been wary of any investment opportunity that promised such a significant ROI. Even more important, the victims should have consulted other commercial real estate professionals for their opinions on the matter.
If an investment opportunity stands up to the close scrutiny of multiple industry professionals, it may be worth pursuing. However, if a single individual or company is promising unrealistic returns, an investor should think twice.
Another scam targeting renters is often seen in the residential real estate market but can be found occasionally in the commercial sector. Online classifieds will often list office spaces to rent, and scammers will sometimes post fake ads using real pictures of properties in the area. The rent is often listed as absurdly low in an attempt to persuade potential renters into filling out an application. This application is actually a cleverly disguised phishing scheme that will probably ask for a credit card or Social Security number (for credit check purposes). By the time the applicant receives a rejection letter, the information has already been compromised.
As the old adage goes, If it sounds too good to be true, it probably is. Use your head, consult multiple real estate experts and watch out for that offer that seems a little too perfect.
Neal B. Custer, president of Reveal Digital Forensics & Security, a subsidiary of Custer Agency Inc., adjunct professor at Boise State University. firstname.lastname@example.org. Written with Reveal information-security expert Dylan Evans.