by guest author Jim Sheils
Our friend and fellow real estate investor out of Jacksonville, Florida, Jim Sheils explores the world of real estate investing as he shares tips for covering your butt and avoiding slimy gurus and foreclosure homes that are never going to give your money back.
This is an important subject and no one else seems to bring it up. But it’s something you need to know about so you can stand up to the 800lb gorillas that are ruining the wealth creation industry.
I am passionate about education. I love to teach. I love to learn. I’ve spent 6 figures on my education and I’ve made 7 figures from it. So let’s make it clear right up front, I am pro-education and from my own experiences, I can honestly say that paying for specialized knowledge can be the best decision you’ll ever make. (As long as you put it into action and go to the right people to learn).
However, being around the seminar industry for several years both as a student and an educator, I have also learned there are a lot of fakes out there. Some of these “Gurus” have never actually done what they’re teaching.
TOP 3 WARNINGS FOR GURUS YOU WANT TO AVOID:
1) They are arrogant and know it all.
They did it all on their own. Superior intellect and fancy techniques is all it took. No mistakes will ever be spoken about. Arrogance (not confidence) oozes off of them on stage. They speak down on their students. If you were in a normal conversation at a party with this person, you’d have no desire to hang around them, but now…. since they are on stage….and promoted as a real estate investing guru…with a large following… Now it’s OK to be rude and arrogant? I used to think so. But now I know better. If I see someone act this way on stage now, my internal alarm system automatically goes off.
If arrogance is oozing off them and they are rude to their students, it’s not OK .You should not be impressed and I encourage you not to work with them. Gurus put their pants on one leg at a time just like the rest of us. Be weary of these types of people, be VERY weary of them. These are the exact type that will take your money with no remorse and have little concern for the quality or effectiveness of the education they provide you.
2) They don’t teach anything.
They give no content! Everything is an inflated success story to support their flawless investing technique (with very little details). They’ll constantly be giving you a sales pitch to buy a bunch of bigger, more expensive programs that promise the content you’ll need to make a million dollars in 90 days or less….yeah right. If you go and see someone speak, and they give you nothing but a sales pitch with no content , expect the same thing for their next 2 programs you sign up and pay for. These are the “carrot on the stick” gurus that will stretch out and delay the real info you need to learn and they make you pay for it dearly.
3) They over complicate the business.
If a subject can be taught in 1-2 seminars…they will divide it into 10 seminars. They make you believe that real estate investing is a great abyss and without signing up for every program and product they have to offer, you will fail. They also convince you that they have some fancy “system” that is the secret way to huge profits…. GUARANTEED (there’s no such word in real estate investing!). These gurus love complexity and encourage you to take part in it. So if someone is telling you that you need a fancy phone system, software programs, massive power team of lawyers, websites, expensive marketing, huge letter campaigns, etc just to get started in foreclosures….RUN AWAY! You do not need ANY of those things to start investing in foreclosures.
The reason I talk about this is in such detail is because the foreclosure market is becoming the big buzz again in financial education. And with popularity behind it, the Fakes are entering the arena like sharks circling their prey. But that’s OK, you now have the education to identify them and most importantly avoid them!
HOUSING RIP OFFS
Housing rip offs are happening all over the US and international investors are the ultimate target for them. Most of the housing rip off companies (and their promises) look the same.
Everything in these deals will be promoted based on one main theme: THE PROPERTY IS CHEAP WITH HIGH CASH FLOW.
House for only $20k to $30K with great rent returns. Sounds great in theory but if you only scratch below the surface you see that most of the time this plan is a house of cards. Most of the homes are in cities with terrible fundamentals (population, economy, desirability, supply and demand are lacking). The only one in favor is affordability. And you know from reading Rev N You that affordability (a cheap price) does not secure a good investment especially if the other fundamentals are lacking. And especially if these homes are in terrible areas and in terrible condition. And although they talk a big game, these House buying groups usually have no real construction crews or tested and proven property management in place.
They also like to claim they are buying the ever-so-sexy “BULK DEAL” or have connections with banks to be able to get these great priced homes.
BUT… the truth is anyone could buy these homes but very few people want them.
Why? because vacancies are high, turnover is high, repairs and maintenance are through the roof, management is tough to find and resales are lacking in the area. But, of course they’ll throw out the line “it’s a great transition neighborhood”. Well, history has shown that in most cases, when economic times get worse, the quality of a bad neighborhood get even worse, not better. And the best part of it, although this group is yelling for you to put your money into these crappy houses and areas, they themselves are not! They are just collecting the money and running for the hills. Don’t be surprised that when things go wrong, no one from this Housing group will be available to take your call. You will be on your own. But in the beginning of the deal you will find them promising the sun and the moon.
Don’t believe it.
In theory, all seems full proof but when you do this system on a large scale in tough neighborhoods, the results can be horrible. And remember, the reason they sell you homes at these prices is not because they think they are good deals!!! It is because more potential investors can afford a $20K house than a $100k house. It’s also easier to market and no financing is needed because people can pay cash at such low price points. With this bigger pool of buyers they can sell more houses, which makes them more money but also usually does more damage by leaving more inexperienced investors in tough neighborhoods with homes in awful condition. We could make 10x the money with our turn key rental business (in the short term) if we followed this model and went into dangerous neighborhoods and bought cheap houses but I wouldn’t sleep at night knowing I put clients in a very risky situation with bad intentions. But be warned, a lot of people just don’t care and will not hesitate to line their pocket by putting you into a terrible property.
Sure Signs of a Housing Rip-Off
1) Cheap price is all they promote
2) High rent returns in theory but when you average in the higher vacancy rate, the higher repair averages, the higher turnover rates, higher damages, etc….you do the math ….that extra cash flow gets swallowed very quickly
3) They buy run down homes in bad neighborhoods…oh sorry…they buy “transition neighborhoods”(High crime, high vacancy, no first-time homebuyers, only investor owned property)
4) They will claim the house needs very little work to become “rent ready’
**A lot of these homes are uninsurable!!!
5) They talk big #s “We buy 20, 30, 50 houses a month (as if that’s a good thing)
***Remember, if you buy 50 a month…you need to be able to rehab 50 a month….you also need to be able to find 50 good tenants a month….see where I’m going with this, without some major traction and support systems in place, these groups doing high volume can have an ugly implosion and the investors are left holding the pieces. I’ve seen it happen and it is a terrible thing to see so many good people get burned in one big greedy move by one of these so-called “expert” house buying groups.
6) They like to tout that they are investing in several markets (as if that’s always a good thing!)
****If you are in 10 different markets, you need 10 different teams on the ground that can perform. It can be a full time job overseeing one good team in one good market!
7) They will claim they have “rent to own tenants” ready to go and a mortgage note buyer to buy you out of the property within a few years. They will also tell you “We can get a government section 8 tenant to live there”… really? That can be easier said than done. HUD tenants have a lot of choices of place to live today and they can now avoid some of the tougher areas and rent in better areas.
8) The house group that’s selling these homes to you the investor DON’T own any property in that area.
9) Everything is theory because they have no track record.
Questions to ask
- How long have you been investing in the area?
- Do you have rental property in the area? And how long have you owned there?
- Property Management? Contractors? Have they been tested?
- Testimonials? Client Reference?
Take stock in this info and be sure to understand and follow the warnings. If so, you can avoid pain and headaches suffered by many investors (like myself) who had to learn the hard way.
Jim Sheils is an active real estate investor in Jacksonville, Florida. He and his business partner and lifelong best friend Brian Scrone have done nearly 500 real estate transactions, and currently specialize in helping international investors make solid investment moves in the Florida Market. Learn more about them at: www.jacksonvillerealestatewealth.com
Published: June 27th, 2011
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