Originally posted by Tyler McCracken on 11/22/2009 on www.askthelandlord.com
PAYING FOR A REAL ESTATE EDUCATION
It was the Fall of 2007 when I knew we had reached the pinnacle of the real estate frenzy locally in Charlotte, North Carolina…
I was at a local real estate meeting and the focus of the nights talk was from a real estate investor and educator that collected big fees for educating (primarily) new investors from around the United States.
He brought up his newest deal. A deal that in retrospect I knew more about then he. He was up there educating us on how he paid some $115-125k from a wholesaler for this ranch in this great neighborhood, how some $40-80K was going to make it retail out at some $299K+. Of course when he mentioned the MAJOR Street artery it sat 30 feet from (not to mention the high power line tower less than 30 yards from) a few of us who know our market scoffed and lightly challenged him. He shrugged his shoulders and said “what, that’s what the appraisal says it’s worth”.
He proceeded to talk about how he got the original seller (homeowner) whom assigned to the wholesaler to subordinate her debt to the neighbor (of his) that provided the first loan (with rehab money thrown in). He mentioned how relationships create opportunities like this for good private money and how he didn’t need high rate hard money and how he set it up in a corporate entity without personal guarantees… In his mind he was going to make a killing and of course, he would be more than willing to teach us how to find, fund, and create great windfalls like this too…..
What he failed to mention was that hard money wouldn’t fund his deal (bad sign since our market was still good at the time), that his home was larger than normal for the neighborhood (thus the end sale price will probably have a lower price/Sq.Ft.), nor that homes on this major artery hadn’t sold for more than $199K (only houses back in the neighborhood sold for more) other than one other individual home. Based on location, I pegged the full retail value at $145-165k with a minimum of $35k rehab. Nobody should of paid more than $80k for that home. He was creating a money losing venture for all the unfortunate souls involved to have known him (and thus, believe him) from the very beginning.
CAN YOU SAY DEAD ON ARRIVAL?
I was blowing leaves today and reflecting on the bum rap I have been giving Real Estate Guru’s (and thus, mentors too). Thinking how no matter if people pay $29.95 for a book, $999 for a coarse, or even some $2,999+ for some form of one on one mentoring or bootcamp -If a person pulls out one idea that pays for the cost (let alone more) than perhaps it’s not a bad deal after all. That person has the opportunity to build on that education and advance their real estate goals one step faster.
What gets my goat is when the masses are led to believe that if you follow the advice that within a year you will be an instant property moving multi millionaire. That is far from the truth. Or perhaps, when the system sold doesn’t even work in today’s market. Folks –that does occur!
I was thinking about this because I have found myself becoming a real estate educator in Charlotte, NC. While I’ve not sold a course or charged a fee, I have incurred great personal growth and indirect business as a result of giving what I’ve learned over the years. I’ve had people suggest I mentor and/or create a coarse (or even E-Book) hitting the circuit to creating a new business model. I’m enamored with the idea and it is a partial reason to my blogging. So here I am beating up the very people whom I may emulate? That sure is talking out of both sides of my mouth –huh?
So I got to thinking what qualifies me to educate? Why should people trust me with assisting in setting a financial course for them –let alone perhaps even pay for it?
What I do not see in the Real Estate Educational World (other than those whom travel the professional circuit in the licensed side such as realtors, lenders, and appraisers) of Investors is educational designations and/or real world proof that what one spew’s -actually works consistently. Hardly any mentor/guru proudly points out any type of professional designation that shows at least some formal type of educational achievements nor will you find true consistent deals done (anytime recently) proven let alone sharing real losses occurred from mistakes. I don’t want to see pictures of big checks!!!
Let me ask you. When you rent a home, loan money, interview a realtor, potential employee, and/or look at investing money into a business or investment, what do you do? Let’s see. You get a credit application, look at their lifestyle/business operations, and/or financial statements. Right? If not, you’re setting yourself up for failure.
What should you ask of anyone whom you’re intending to invest a hunk of money with? How about proof that what your investing in works? Public records can confirm buy and sell prices not to mention actual debt incurred too. Deals that went bust work too –heck I want to hear all about those so I don’t repeat them either. Why not financial statements and/or even credit records? If they are on the up and up, it shouldn’t be a problem. Don’t fall for the, “well I have various corporations, trusts, and/or family partnerships (BULL CRAP) for wealth creation, tax minimization, and asset protection so you can’t see what I’m doing.” That’s a big red flag and I would warn you to run! Believe me –anyone truly at that level won’t be spending their time traveling the country selling courses and/or mentoring you.
You see if I’m going to truly educate on how to avoid pitfalls and excel at creating great deals –I need to provide real world examples of what I’ve done –not some canned response rehearsed from what I’ve read others doing. I need to show you real life examples and then have you be able to actually verify those examples independently. Think that’s overboard? Did you know I do it to you if we’re doing business together? Sure Do! After all, I want to know whom I’m investing money let alone hard earned time. So I would expect you to do the same with me.
Think that original owner (of the home to close to the major road), the neighbor /lender (of the mentor), and even the self-proclaimed mentor himself, could have avoided mental and financial pain had they investigated whom and what they were investing in? You bet they would have!
You see not everybody is whom they say they are. Verify and then slowly trust. Watch for red flags and run if it doesn’t smell right. Watch people for months (if not years) before investing with them.
Can you sit in your underwear and make some money on a real estate deal without ever seeing it? Sure you can! Can you do it consistently month over month without losing your shirt? Odds are against you. Do you want to hear truth or have someone blow smoke up your rear? There is both good and bad out there.
It’s your choice –EDUCATE YOURSELF ON THE EDUCATOR BEFORE PARTING WITH YOUR MONEY.
That house I spoke of is still sitting there… Empty with a year+ old permit in the window and only half rehabbed. It hasn’t been touched in some 12 months. According to public records the original investors are still owed $10k more than what (only) one house has sold on that street this year based on loan face value alone. Think they’re collecting monthly interest payments? I’ll bet not.
Talk about paying for an education.
As of 1/5/2013.., this home still sits deserted and a sore eye on the neighborhood.
They are proud of the seminars they attend and are happy to regurgitate all of the talking points. But until they have their feet on the ground grunting it out in the day to day grind most of their seminar education is a waste of money.
Most real estate gurus can’t Teach. They Can Sell you a Dream in a heartbeat!
In my years as an investor I have learned that you must quickly discover the other persons motives. If it involves your cash, you best know why you are agreeing to give it to them, and determine if what you receive is more than what you gave.
Most people are just not worth your money. I Always remember a saying from kindergarten: “what is yours is yours and mine is mine.”
When this saying changes to whats your is mine and mine is mine you should know to run away, do the same with your money. You can thank me later.
There is a big void in RE education as real-life instruction simply does not exist today. We now go to a RE Meeting every month and for the most part, I sit and listen in awe of what most simply do not realize is going on all around us. Don’t get me wrong, many know their stuff about the mechanics of RE but what I see is they miss the human side. They, like many others, group parts of it together, failing to see the intricate details of how some of these deals come together and what causes them. Because the “cause” is how one can find more.
I’ll tell ya’, you put together a real life coarse with “true to life” methods that have actually been used and I think the sky is the limit. Like you, I follow area investors and owners, both successful and not-so-successful. I watched during the rapid appreciation times several investors that were buying way too much as well as paying way too much; nearly all of them are free falling today. One had around 30 SFH’s at one point, paid too much and is methodically losing them all….and roll of the drums….he’s a RE Broker. I can’t help but believe many of these failed investors followed the supposed guru’s of the world.
If I were to start a training coarse today, I would be inclined to charge a mid range amount for the 1st 3 to 4 coarses. After that, I would charge a fairly large amount as what you’re teaching is not generic run-of-the-mill stuff readily available to anyone. Will they pay?? I think once word gets out of the content and value, filling seats would not be a problem.