IDF retirees have become the potential customers of real estate developers because of the capital available to them from their release payments. In some cases there will be contacts who serve as a channel of trust into the community, who will earn a commission for the connection they made to the developer and will also receive “sales fees” from the buyer for the deal they obtained for the customer.
There is nothing that saddens me more than hearing about retirees who fell for a scam, all because they relied on intuition and the “connection” with the developer.
If there is one thing I have learned in 20 years in real estate, it is to separate friendship and end-of-day beers from real estate business.
This week a new client came to my office and, sitting across from me, told me that he had invested a considerable part of the severance pay he received on reaching retirement age in buying several houses in a foreign country. The company that sold to him showed him several houses, including plans for renovating and upgrading them, and then promised him an annual income from rent amounting to about 10% of the properties' value.
“It was too good to be true,” he said.
The visualizations they showed him looked as though the houses had just come out of a magazine. Just like the shows his wife made him watch on the Good Life channel.
He was persuaded, signed an agreement and transferred the consideration to the company, and no red light went on for him when, right after signing, he was handed 12 checks on account of the first year's return.
At the beginning of the second year the company announced that he would have to deal directly with the tenants. He boarded the plane.
When he landed at Ben Gurion Airport he came straight to my office.
It turns out that the promised renovation was not carried out. The pictures that were sent to him were visualizations or just pictures taken from the internet. From the conversations he held with the brokers he tried to recruit to help him rent out the houses, he learned that the rent that can be charged is significantly lower than what he was promised and received in the previous year.
I smiled painfully. A gentle smile meant partly to calm him and largely to convey the message that I am with him.
I asked to see the agreements he had signed. And as I expected, they contained no commitment to renovate, and certainly did not define what the renovation would include. They also contained no commitment to a return. At least one positive thing happened - the houses are registered in his name.
“How did you not understand that something was wrong?” I asked. “How is it that before the renovation, and right after you gave them the money, they give you checks that are supposedly the return, and that doesn't set off a red light for you?”
“I heard stories, they let me speak to references, I trusted them,” he replied.
A developer, marketer or broker who commits to you on the return, and gives you an advance check for the return - raise an eyebrow, let a spotlight go on and a big warning sign light up for you. In a large share of cases, whoever sells you with a return promised in advance knows he has earned enough on the sale transaction, and if he does not manage to achieve the return he promised, he will make up the difference out of his pocket - out of your pocket.
Market fluctuations, small changes and differences between one street and another and between one building and another, all of these affect the rent that is paid and are unpredictable, and certainly cannot be committed to in advance.
You have been warned!!!
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית