Copyright 2000 John T. Reed—Last updated 11/15/00

Real world real estate versus seminar-book-and-tape real estate

Real estate investors are interested in what works in the real world of investing. Bad real estate investment gurus are interested in what works as far as getting you to buy their stuff. Unfortunately for would-be real estate investors, they are two different things. In the seminar, the technique being taught only has to sound good to a layman. In the real world, it has to work with buyers, sellers agents, tenants, loan officers, landlords, title companies, and so forth.

Get rich quick and easy with no risk or work

What the public wants to hear is tht getting rich in real estate in quick, easy, and requires very little effort. That’s not the truth, of course, but that’s what sells best to the lowest socioeconomic classes. The gurus do not use phraseology like “get rich quick.” That phrase has become a red flag. But they simply have various average-looking people give testimonials in which they say things like, “Two weeks after I took so-and-so’s course, I put $40,000 in my pocket at closing!”

Is that quick? You bet. Was it easy? Sounds like it. How hard can it be it it only took two weeks? Is the graduate of the course rich? Not yet, but at $40,000 every two weeks, they soon will be. Did the guru say his program was a get-rich-quick scheme? Not in so many words from his own mouth. From the mouth of the testimonial giver in slightly different words? You bet.

Standard stuff

What works for getting seminar audiences to cough up money is pretty standard. And the bad gurus are not real bright. Few of them ever had an original idea in their lives. So they attend each other’s seminars and read each other’s books and listen to each other’s tapes. Heck, a great many of them used to work for a guru. That’s where they got thte idea to go out on your own and cash in on this gravy train.

Bottom line is they all teach the same set of about two or three dozen techniques. I am now going to tell you what they are. That should save you some money. If you insist on attending a bad guru’s seminar or buying his products, you will see through them sooner as a result of having read this page.

Bad guru version
The truth
Bad guru’s motive for telling you this
It’s easy to buy good deals for nothing down It is extremely difficult Marks won’t buy his real estate investment stuff if it takes down payments because they do not have the money for a down payment
You do not need good credit to invest in real estate Bad credit is an extreme handicap to investing in real estate. It forces you to seek loans by taking advantage of people who are too unsophisticated to check your credit. Most of the people dumb enough to buy get-rich-quick stuff have bad credit.
You do not need experience You can get experience on the job to an extent in small-unit residential. You can also get artificial experience from good books and courses. However, if you apply for a mortgage on a nonresidential or multifamily residential property, the lender will ask for your resume of experience managing such properties. If you have none, you almost certainly will not get the loan. Even with smaller residential properties, lack of experience could doom your investment. The guru’s target beginners because experienced investors see through their materials
Put “or assigns” after your name in contracts so you can flip them Competent sellers and agents will want to know what this is about. Most will probably tell you to wait until you have a specific person whom they can check out before they agree to assignment. If you find an unsophsticated seller or agent who makes no protest of this clause, inserting it into a contract may render the contract unenforceable. There must be a meeting of the minds in order for a contract to be enforceable. Judges would typically regard such a blank-check clause as proof there never was a meeting of the minds because no one would ever agree to such a clause. For example, it ostensibly would allow a qualified buyer to get out of a deal by assigning the contract to a homeless person. Courts will not enforce such nonsense. It sounds clever and shrewd to a layman.
Drive around looking for neglected properties This is way too inefficient. I have interviewed thousands of successful investors and never found any who do this. What successful investors really do in this regard is selectively react to such properties when they become aware of them in the course of their normal activities. Laymen probably would not think of this, but it sounds like it would work to them.
Buy paper at a discount then get a seller to accept it at face value as down payment Competent sellers and agents will throw you out of their office or hang up on you (as I did to one such offer). This is pure fantasyland real estate. It would only work if you could find an agentless seller as dumb as a person who would pay money for such advice. If you could find a seller to agree to this, it would probably be an unethical deal, depending upon the market value and the sale price, because of suitability and deceit as to the true value of the paper. It some jurisdictions, it would arguably violate laws against unconscionable acts. Bad gurus love to find techniques that laymen think will let them buy for nothing down and maybe even put cash in their pocket at closing.