A recent Houston Chronicle article highlighted the importance of thoroughly vetting real estate investment partners before committing your hard-earned money. The article told the story of a group of Houston apartment investors who are now suing the operators they invested with, alleging fraud. In contrast, at CREI Partners, our core values include transparency and disciplined strategy, and giving you the tools to invest safely and make the best investment decisions for yourself and your family.
The story of Applesway Investments serves as an important cautionary tale for anyone considering real estate investing. It is imperative to work with trustworthy, transparent partners who provide adequate resources and are readily available to answer questions. While all investments entail risk, there are steps you can take to make sure you are investing in a way that honors your risk tolerance. As the saying goes, if a deal seems too good to be true, it likely is.
Steps to Take to Invest Safely:
Before investing, always do your due diligence by asking to speak with current investors about their experiences. Get to know potential partners before handing over any money. And never overleverage yourself or your family’s finances to invest. The investors interviewed in the article described using life savings, retirement funds, and even children’s college money to invest – and now have little recourse.
As one investor hauntingly put it: “Now without those funds, he’s left with not only higher payments on his home, but little extra resources to pay for his son’s college education.”
Real estate investing can be an excellent way to build wealth if done responsibly. But it requires trusting the right partners. Don’t just blindly hand over your hard-earned money without verifying credentials, speaking to references, and fully understanding the risks involved.
According to the Houston Chronicle article, the group of investors consisted of 123 first-generation Indian immigrants who heard about the potential deals through word-of-mouth in their community. They trusted the cultural connections and invested in properties that were never actually purchased.
This demonstrates the need to look beyond casual recommendations and do extensive independent research. Don’t let excitement or affinity cloud your judgment when assessing investment quality. Rigorously vet the sponsor company, leadership team, assets, business plans, and investor agreements yourself.
As described in the article, the sponsor company Applesway Investments allegedly misrepresented how they were deploying the capital. Applesway Investments told the investors their funds were financing a specific property. In reality, the funds were redirected to an entirely different speculative deal without consent. Applesway Investments is being accused of fraud.
To avoid this, real estate investors should insist on transparent reporting. Only work with General Partners who provide frequent updates and details on how your capital is being used. Document clear communication and information rights in the investment contracts.
Vital lessons for investing safely in real estate:
- Do thorough due diligence on sponsors and deals.
- Understand where your funds are going and get frequent updates.
- Don’t invest your emergency fund, or with debt.
- Seek legal counsel to review opportunities, if needed.
- Be wary of “too good to be true” returns. Are projections supported by reliable data?
- Watch for red flags like delays and excuses.
- Ensure your rights are protected in investment contracts.
Thoroughly vet all real estate deals, get second opinions, speak with multiple current investors. It is also a great idea to independently verify information provided, and seek legal counsel before moving forward. Doing your homework upfront and finding ethical, transparent real estate professionals helps ensure your investing success and prevent the heartbreak experienced by the investors in this article. Let their lesson be a warning to us all – trust, but verify.
At CREI Partners, integrity and transparency are at the core of everything we do. With over 20 years of experience, our managing principal Wayne Courreges III leads our conservative, risk-averse approach to real estate investments. As a veteran, Eagle Scout, and Certified Property Manager holding an MBA and MA in Economics, Wayne operates with the highest ethical standards. We welcome any opportunity to speak with potential and existing investors, provide references, and build confidence that CREI Partners always takes the utmost care when stewarding your investment. Our entire team believes strongly in doing business the right way – the honest way.
Additional Resources:
Navigating Real Estate Limited Partnerships as a New Investor » CREI Partners
Subscribe to our newsletter so you never miss out on new investment opportunities, podcasts, blogs, news and events.
Leave a Reply