Lots of Canadians turn to real estate investing as a way to make money. Unfortunately, people like James Steinhubl can make real estate investments look like sketchy territory. He ran a scam where he collected money and credit information from investors to buy properties and then default on the mortgages, leaving the investors holding the bag for the mortgages and not refunding their fees. Ultimately, he defrauded investors of almost $4 Million and ended up in jail.
James Steinhubl Behind Bars
Dale Miller was one of those duped by Steinhubl, and he told CBC that he only found out about the scam when two other people claimed ownership of the investment property that was supposed to only belong to him. He couldn’t get out of it by declaring bankruptcy because of the fraud involved in the transaction.
Steinhubl was sentenced to 42 months in prison back in 2011, but was acquitted on 15 charges of fraud over $5,000 at the time. While he was out on parole after serving his sentence, this acquittal was taken to the Alberta Court of Appeal who recently reversed it and extended his sentence for another 2 ½ years.
As unfortunate as this story is, the questions we should be asking is... How can you avoid being taken in by a fraudster like him?
Investigate Business Opportunities Thoroughly
Before investing in real estate, especially through an individual or private group, make sure you are handed a contract that is vetted thoroughly by your own lawyer. Even then, there can be issues. Steinhubl’s scam looked legitimate on the surface since he owned 31 properties through his company, Canadian Best Homes. The sum of money that investors were required to initially hand over may have not been enough for most to give it a second thought, much less seek legal advice.
Beware of “Buy it Now”
As with anything else in life, if someone is coming to you with an opportunity that is only good for a limited time, it generally means that they don’t want to give you time to investigate your options. Fraudsters are great at talking and will have very good reasons that explain why the offer is on a limited timeline, but alarm bells should sound if you are being urged to do it immediately.
If an investment sounds too good to be true - it is, just walk away!
Educate Yourself on Real Estate Investment
Real estate investment is a complex animal, but it doesn’t have to be. That being said, your real estate investment education shouldn’t begin and end with reading a copy of Rich Dad, Poor Dad by Robert Kiyosaki. While there are good ideas in the book and others by Kiyosaki, don’t rely on a book written primarily about the American real estate market before you start handing money over to anyone. There are real estate investment courses available at many local colleges and universities across Canada, and excellent books on the subject such as Commercial Real Estate Investing in Canada by Claude and Pierre Boiron. Look for books and courses like this that go into the gritty details of the Canadian real estate market.
Real Estate Investing is Not For Everyone
If you don’t have the time to educate yourself on real estate investment, you may not have the time to participate in it. Investing in real estate is a very different thing from investing in the stock market. It should be treated as a side business, not as a separate basket for investments. If you’re looking for a bona fide way to invest in real estate, check out the Smith Manoeuvre. This will allow you to pay down your mortgage faster while using your home as investment equity, without requiring you to hand over any money to a shady group or individual.
For more information on the Smith Manoeuvre and advice on mortgages: