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
In this call Julie and Dave will show you how you can make 2011 the year where you take a gigantic step forward towards transforming your financial future … and how you can do this with just two deals.
This call is all about how two under market real estate deals can put $500 more in your pocket each month, get you a $5,000 pay day, and increase your net worth by up to $50,000! And they will give you a simple 3 step process to get that started.
Specifically, in this call they will share:
Examples from two average deals Julie and Dave did in 2010 that put more than $500 in their pocket each month, gave them close to a $5,000 pay day, and added to their net worth by $50,000.
Three steps to find under market real estate deals like the two they share,
How you can do these two deals even if you have less than a few thousand dollars to invest,
Plus they will invite you to apply for a complimentary one on one strategy session (but you’ll have to listen to get those details because they only have a limited amount of time to offer those!!).
I want to purchase a rental property with a self-directed IRA plan. I do not have enough money to purchase without a mortgage. Very difficult to finance. How can I do it? This property is a single family in the Tampa Fla area with a good positive cash flow. Hard money is an option; but the interest rates are too high and would wipe out cash flow. I want to purchase and hold for cash flow. Any suggestions?Should I take the hit and move the money out of my IRA and pay a penaltyor wait till I am 59.5 in October 2010.
I’m Julie Broad with Rev N You with Real Estate …and todayI am going to tell you the story of the Ferrari Enzo and the Honda Civic. Then I am going to introduce you to our first property and give you three easy to use tips to find your own winning real estate investment.
If you’re not familiar with Rev N You, you may not know that our investing philosophy is not about getting rich quickly. It is about getting rich with real estate … and it’s about putting cash in your pocket EVERY month from your properties … but, for us, it’s about taking minimal risks to gain big rewards…
“We love your down to earth approach but we can’t wait years to get rich” or “I don’t think your program is going to work for me – I think I need to do flippers to get fast cash” or “Sorry but your slower approach is just not going to work for me. I have to become a millionaire this year.”
We get it!! We really do … after buying a couple of properties we weren’t getting rich fast enough so we set out doing a bunch of high risk deals. High risk deals that today we’d never touch – because today we understand the fundamentals of real estate investing. And, for the right person with the right knowledge and resources, some of the deals we did would have been golden opportunities, some were just stupid.
But it’s why we now explain things with the Ferrari and the Honda.
You see – there are SO MANY ways to make money in real estate. And they are exciting!! Flipping, buying wholesale, development, subject to investing, lease option investing, buying foreclosures … the list is long … and there is BIG MONEY to be made and some of it can be made quickly!
But it’s like learning to drive on a Ferrari Enzo vs. a Civic.
Get what I am saying?! What we teach are the fundamentals of real estate investing. YOU HAVE TO KNOW THEM to safely use any other technique. When we didn’t fully understand the basics and we got into no money down deals and flips we got ourselves in over our heads. And, had we not had good jobs at the time, we would have caused ourselves some serious financial problems.
Now, we’re confident in the fundamentals and we’re expanding into other strategies. Our wealth is going to grow at an accelerated pace … but even with our tried and true basic low risk investing strategy of buy and hold we’re still enjoying thousands of dollars in cash flow from our properties AND we have net worth of over a million dollars … so like I said … the Honda gets you there just maybe not quite as fast (but with much less adrenaline).
So what can you do to find your own winning properties in today’s market … well … you might already be familiar with our five steps to invest in real estate, so I am going to give you three things to do right now to get yourself ready to take those five steps:
1. Educate Yourself
We never stop learning … I read at least three books a month… I try to read a new book every week. I spend close to $20,000 a year on courses … some are real estate related but others are specific to marketing or even just personal development. And we both find people we can learn from. Dave in particular is really good at this … he picks up the phone and talks to people. He finds people in the areas of expertise he wants to learn about and talks to them. He meets people and asks them lots of questions.
The best deals usually come from within your network. Realtors or mortgage brokers with their ear to the ground are a great source of deals. You have to get plugged in to the people who can find you great deals. If you are someone that doesn’t have money to buy real estate – networking is critical. We’ve been able to build a nice sized portfolio not because we did no money down deals or because we had a lot of money but because we found a few partners with money to invest with us. They didn’t have time or knowledge … we took the time to build the knowledge and became their partners.
You are going to need partners to work with and the best way to find them is through your network. Ask friends, family, colleagues, your family dr. or dentist … go to local real estate investing groups … just meet people!! Start educating them about what you’re learning and see if there’s a mutual interest.
3. Take Action!! If you sit on the sidelines waiting for this market to improve you are going to miss the opportunity of a lifetime. Big wealth is being created right now!! Sit down and make your plan!! Where do you want to be? Where are you today? What is the gap in the middle and how are you going to get from here to there.
Just the act of writing down your plan is taking action … and I love this quote from Robert Ringer in his book ACTION! Nothing Happens Until Something Moves. Where he says:
“When you take action – particularly bold action – the atoms in your brain vibrate at enormously high rates of speed, which often results in amazing and otherwise unexplainable “coincidences” happening in your life. I believe that the genius that erupts from action … produces a “telepathy” that brings a person in contact with the people, things, and circumstances he needs to accomplish his objectives”
So – with that – take the time to educate yourself on the fundamentals of real estate investing, go out and find some people doing what you want to do, or that can help you do what you want to do, and TAKE ACTION!! We promise that you will not regret it …
It started innocently enough – there was an ad on t.v. at about 11pm one night promising to make me rich through real estate. We’d already bought a couple of properties, but I wasn’t getting rich. I thought that this would be a great way to learn some tricks and maybe even quit my job within a year or two. So, on my lunch hour, I went to the hotel where their free course was being offered.
They didn’t teach me a darn thing about real estate investing, but they sure had me PUMPED UP and ready to be a millionaire real estate investor. I barely flinched when I paid $2,000 to attend a weekend course. I could even bring someone at no additional cost! I could already taste financial freedom.
Well, at this one course, I learned a lot. But what I really learned was that I didn’t really know much at all.
Sure, they gave me tools that I could use, but they were quick to tell me how their other courses would really help me achieve my goals. Before I was done with this program, I spent a further $20,000 on more courses. Through the course I completed one assignment deal (basically a property flip) to make some cash and bought two properties for no money down. Doesn’t sound that bad, until you find out how off track that course sent me! All hyped up and fully believing in what they were teaching, I made some really bad real estate investing decisions and those bad decisions cost me for many years to come.
Despite the detour these courses sent me on, I still believe there are a lot of GREAT reasons to take real estate investing courses:
Networking! You might meet a future partner or mentor.
Can learn a great deal about real estate in a very short period of time.
Learning tricks that may take you years to learn on your own, if at all.
Motivation – the courses I took got me so excited about real estate investing it was all I could think about for months!
Opens doors to an investing network where you may learn about opportunities long before the general public.
But, keep in mind the drawbacks to the real estate investing courses that get the late night t.v. time slots:
Once you’ve attended the FREE seminar, the weekend courses are usually pretty expensive.
You can easily experience information overload! In less than 48 hours so much stuff is thrown at you that you don’t know what to do with it.
Upselling! Once you are at the weekend seminar, much of the speakers’ efforts are spent selling different courses. And, when you are a beginner, you feel like you NEED all of these courses to get started!
Techniques don’t always apply to your area, or your target property type. For example, I enrolled in a course that largely applied to the United States market which is different in many respects to the Canadian real estate market..
Despite the drawbacks, I would never discourage anyone from taking a good course. I believe signing up for a real estate investing course is a good starting step for beginner investors, but what can you do to ensure you find a good one and get your money’s worth?
Know Your Objectives: What do you expect to get out of investing in real estate (quantify this if you can)? What is your risk tolerance? What is your aptitude (can you or do you want to fix things and/or be a landlord)? Write your objectives down, and have a good idea of what you are trying to do before you look for a course.
Do your research! A quick online search for real estate investing courses will turn up a lot of options. Go online and look for forums or reviews of the course. Ask friends and family if they know of anyone that has taken a real estate investing course.
Request their company information by mail or go online to learn more about the founding company. Have they been around for awhile? Who, specifically, will be teaching the course? Try to obtain the speakers bio’s before you sign up. What is their experience? Trust me, Robert Allen, Russ Whitney and Donald Trump do not even stop in to say hello during their courses!
A Word Of Caution We’re in real estate for the long term. I have tried no money down deals (where you finance 100% of the purchase price of a property), and have found that they aren’t in line with our goals. Personally, I would avoid these programs.Generally if you buy with no money down, you are either buying a property in a bad location OR you are financing so much that it is very difficult to cover your mortgage costs AND your other expenses. It’s a very high risk way to make investments – especially in a down market. One of the most famous No Money Down authors and programs was created by Robert Allen. This is only one person’s opinion, but I agree with much of this reviewers feelings about this program: http://www.onlyreviews.com/robertallen.html
Leave Your Visa At Home, or At Least Know Your Limits
Before you leave the house to go to the FREE course or the paid weekend on real estate investing, decide what is the maximum amount you will pay for the initial course or any subsequent courses and materials. It’s important to do this BEFORE you attend the course. When you attend the FREE or the less expensive courses, the up-sell is going to be a very hard sell. You will be given a rock bottom price if you sign up at that instance. And every bone in your body might be absolutely convinced that you NEED this to achieve your greatest dreams. If you go in with a threshold of, for instance $3,000, then you can hopefully better control what you actually spend on a future course. Emotion plays a big role in your decision to spend more money, and the programs out there feed on this. Take the “impulse” decision out of the equation by knowing what your objectives are and how much you’re willing to spend to achieve those objectives.
So you found a course that meets your objectives, you met some great people and you’re now armed with some tools and tricks to start building your real estate portfolio. Here’s the key to making your course work for you: Get off your butt and use what you learned!
I met with a few different people at one of the courses I attended and they said this was their 4th or 5th course and they still hadn’t bought anything! I estimated they spent about $30,000 on courses and did not have anything to show for it – well, except a fair amount of theoretical knowledge!