Real Estate Experts
“Real Estate Experts” - Selling Good Advice or Just Hype?
As most of us know there is no shortage of self-proclaimed real estate “experts” looking for us to part with our hard-earned money. All you have to do is get excited by the pitch, subscribe online, buy the book or course and part with some cash.
Then go get rich in real estate! … (sorry, I almost forgot that part).
Before I get out the heavy artillery, I have to confess that I have been the purchaser of some of these materials and related course work over the years - mostly books, newsletter subscriptions and a few videos and DVD’s.
Some of you know that I had zero training when I started in real estate development, so in addition to taking my state Real Estate Licensing Courses, I bought as much other material as I thought looked good.
Surprisingly, I found that there really are some experts out there that share very useful experience, ideas and industry knowledge. I have gotten my money’s worth at times, but there is also no shortage of money grabbers that produce little of value except hype.
What to watch out for:
The experts that provide balanced content, that I have actually learned something from, display certain characteristics when presenting their materials.
Here is what they typically DO:
* Discloses how difficult and risky real estate investing can be.
* Provides facts, with minimal hype.
* Includes failures and problems they faced.
* Suggests the investor evaluate his/her personal risk profile before investing.
* References BOTH the upsides and downsides of any strategy they promote.
* Provides clear documentation for any factual claims they make.
* Discloses that you can lose money in real estate investing, possibly all of it.
* Encourages the use of professional advisors when needed.
* Encourages the review and understanding of applicable laws related to the investment advice provided.
* Provides advice only within the parameters of their expertise, backed up with specific examples.
Here’s what they typically DO NOT do:
There are a couple of guys that use some of the annoying techniques listed below that actually do know what they are talking about, but anything on this list is a general warning sign for me:
* Tells you they have “made millions” (the good ones don’t have to).
* Tells you that “YOU can make millions” (they don’t know you or your situation, so it’s hype)
* Promise exponential results. (Was bankrupt 2 years ago, owns 45 rentals today and a Ferrari).
* Uses mega-rich props like private jets, yachts, super cars, and mansions in their promotions.
* Shows the Genius that has succeeded with their ideas, on luxury vacations with the spouse and family.
* Over uses the concept of “freedom”, “free time” or “not working in a J.O.B”.
* Provides guaranteed results. (Other than a full refund on what they are selling)
* Uses the words “fast”, “easy”, or “simple” as it relates to money-making ideas in real estate.
Remember this please: almost nothing in real estate is fast, easy or simple.
A glance at Infomercials – TV and Online:
Sometimes I wonder why the infomercial promoters who supposedly made so much money using the techniques they are trying to sell me, just didn’t keep making millions in real estate instead? One thing I’ll say for a lot of them is that they are so damn sharp and reasonable sounding. Ah, it would be so easy to dream big,… NO, REALLY BIG….through the haze of purple bong smoke.
Like most of us, I have watched late night real estate infomercials and online video promos. What else can I do at 2:00 AM when worrying about a problem with one of my real-world projects? It all just sounds so damn simple - all I need is a lot of get-up-and-go and other people’s money and cooperation! But in reality I have been mostly disappointed and sometimes disgusted by the pitches that are overblown with big ideas and only supported by superficial details.
But wait … there are actual testimonials.
Testimonials, Infomercial Style:
Infomercials invariably put up the winners for me to see, along with their personal testimonials!!! These people have bought the program, implemented it aggressively and succeeded beyond their wildest dreams. They are fat with cash today and living the American Dream that a commoner like me could never hope for. They are standing in front of mansions, luxury cars and boats and as the camera pans across all these toys I start thinking – “That could be me”!
First testimonial - “The Hamster on Crack”. This guy has energy oozing out of every pore and is a fast- talking razor blade. He saw the opportunity, seized it, succeeded beyond his wildest expectations. No fence sitter, he has successfully duplicated the recipe over and over again. At first, I see his very average starter rentals, but that was before. Now I see his beachfront multiplexes, maybe even a commercial building or two…and in only 2 short years. Ahhh, to be young again…
Next, here comes “Harvey, Regular Guy”. He’s a regular guy (just like me, so I start paying more attention). Harvey doesn’t want a Ferrari and the trophy girlfriend that comes with it. He wants to pay off his house and figure out a way to get some retirement income in 10 years. No dummy, Harvey knows that Social Security is not going to be anything he can hope to eat on in his old age. Harvey proves that the guy without a college degree or never-ending refill of Adderall can really do it too! I get emotional just thinking about it. Slumped on the couch and wiping away a tear, I wish Harvey and his wife the very best!!
The “Spousal Endorsement”. Here’s the beaming family; husband, wife and 2 smiling squirts. They both worked in a J.O.B. and were barely making it. They show a picture from before, when they were both bent over a desk with an empty checkbook and a pile of bills. Now, only 3 years later, both have quit their J.O.B.’s and are investing in real estate full time. The next shots have their 10 rentals up on the screen, plus 2 under contract. Like a slot machine, there’s a number roll on the screen that finally grinds to a stop on over One Million Dollars….their new net worth! They both take turns thanking Mr. Promoter for providing their freedom and security.
Saving the best for last, the “Promoter Himself”. He used to be a guy that worked 70 hours per week in a pretty good career. He’s a smart guy and finally realized that trading his time (in fact his very life on this good earth) for money wasn’t going to ever get him the Bentley Mulsanne and the 10,000 sq. ft. Southern California mansion. Now, he has all that and much more, plus he’s going to share it with me! Why? Because he developed a dynamic, repeatable concept that’s a money-making machine. Not only that, anyone can do it!
I ask myself: “I’m an anyone aren’t I”? If Harvey did it and succeeded, I know damn well that I can too.
Plus, there’s special pricing: I get everything for only $199.00, in 4 easy payments, if I act NOW - (normal cost $500). In addition, if I order in the next 30 minutes, I get “XYZ Item” free too, a $50 value! Thank heavens there are people in this world today that think of others, like poor me. Armed with new ambition and most importantly a great idea for a bargain price, I grab my VISA card and start punching numbers into my phone……NOT…
Common infomercial concepts:
“Income Producing Properties”:
I like this idea. I started in raw land development and remained there pretty much permanently. I wouldn’t recommend it as a starting point in real estate investing. It’s a totally front-loaded undertaking in terms of cost and frankly it takes a lot of time to realize profitability. Not to mention, a ton of risk.
Setting myself up with a rental to get my feet wet in real estate can minimize risk exposure, offer monthly income, plus certain tax advantages like depreciation along with historical increases in property values over time. It can also be easier to recover if an investor messes up.
“No Money Down”:
At first glance this might appear to be a B.S. line, but in fact it is possible to structure real estate deals with no cash down. For instance, a transaction where the Seller finances a Buyer on a promissory note with zero down, secured by a Deed of Trust.
Generally, when a nothing down deal is done, someone is taking a disproportional share of the risk. In the example above it would clearly be the Seller, since there is nothing down and he is surrendering title and possession of the property. His recourse in a default is to foreclose and regain possession, but this is costly and time consuming. Meanwhile, who knows what the other guy has done to the property?
“Buying Foreclosures & Short Sales”:
I have to go light on this one since I have never bought a property in the process of foreclosure, or one that has been foreclosed on. However, there are many folks who have done it and it is a concept that is frequently promoted by the “Experts”. If I were looking to enter this market, I would look carefully at the cost of transfer taxes and any additional fees to the company handling the foreclosure. That, in addition to full due diligence.
“I’ll go in the deal with you”:
This is the “Expert” that puts his money where his mouth is. You participate in his program, follow the recipe, and he will finance the deal. If I spent the time to really think about it I could probably come up with 20 decent reasons why this isn’t a good idea, but let’s just look at a one of them. He’s gonna want a cut, probably a big one. I’ll be paying interest on the money loaned to me, plus he will almost certainly demand an ownership stake in the property. His interest would most likely be a majority one. Is that reason enough?
Oh, one other thing: what expert would allow some newbie to do due diligence on a property that the expert hasn’t even seen and then financially back it, while undertaking the kind of risk that real estate investing is?
I have participated in real estate development for over 24 years. I have never seen anything easy, simple or fast. There are times when I have made money more quickly than projected, but these times are few and far between. Mostly it’s grinding it out to the end, whether bitter or sweet.
In my experience real estate promoters sometimes offer valid concepts, but they tend to focus more on lifestyles of excess than the true grind it really is. If it’s more hype than solid content, I would look very closely at what I am about to do.
Maybe a better use of funds for the knowledge gained would be the state Real Estate Licensing Course. That’s what I got the most out of.