Are Real Estate Guru’s Worth the Money?

Posted by 26 February, 2009

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Have you ever thought about getting into real estate investing?

I know everyone has seen those late night infomercials about how you can buy property for “no money down, etc.” While attending a larger real estate seminars it’s it’s hard not to get excited. You have all of these self-proclaimed “guru’s” running around making all sorts of “money” while most Americans are struggling to pay the bills. I’m not one that is interested in doing what other people do. In fact, I generally try to avoid the herd mentality all together. However, similar to when you are bidding on an item on Ebay and you are excited about getting a “deal”, a real estate investing seminar can draw many people to purchase a real estate guru’s CD and tapes. Usually towards the end of the real estate guru’s allowed time, he or she will announce some special offer to the first X number of people. This isn’t what gets me and many others. It’s the fact that when he or she announces this “special” deal, people are literally RUNNING to the table to drop $1000 or more. Looking back on it, it sounds absolutely crazy that a person could get caught up in this, but the real estate guru’s are very good at what they do, selling.

Why do you need a real estate investing mentor?

There are two ways to learn, you can either go out and make the mistakes yourself, or you can learn from someone else’s successes and failures.

“There are no secrets to success. It is the result of preparation, hard work, and learning from failure.” – Colin Powell

Perhaps I am not as patient as others, but I would much rather lean on another person’s knowledge when tackling a new field. This will enable you to get a jump start on the learning curve. This could potentially shave YEARS off your goals not to mention potentially avoiding many of the expensive pitfalls involved in real estate investing. Still not convinced you need a mentor for real estate investing? At the very least, be in close contact with a good Realtor and a good real estate attorney to make sure you are not breaking any laws.

Here are some common sense “rules” I personally use when going to a real estate seminar or meeting so I don’t buy something I shouldn’t buy?

1. If it sounds too good to be true, it usually is the case.

2. If they talk about how much money they have and the cars they own, definitely walk away.

3. If people talk about how easy it is, run. In my opinion, real estate is not complex, it’s a numbers game like many things in life, but it’s not easy. It takes hard work.

4. Whenever someone is trying to sell me something, I ask myself these questions:

a. How are they making money? What’s in it for them?

b. Ask them, “if I knew what you knew, would I buy your product?”

c. Ask them, “if I buy your product, knowing what you know, am I soon going to regret this purchase?”

5. A friend of mine is susceptible to the selling techniques used by many of the real estate guru’s so he simply leaves his check book and credit cards at home. The funny part about him is that he’s been a full time real estate investor for over 30 years. He knows the in’s and out’s of real estate and has been retired from his job for over three decades, yet he is still tempted to buy.

6. If the real estate guru paints a picture of all sunshine and no pitfalls, run. There are a ton of ways to make money, but I’ve never seen a way to make money that doesn’t involve risk. Speaking of risk, Stock market, anyone?

7. If you are serious about real estate investing, don’t invest money in a national guru that lives 1500 miles away. Invest in someone that lives in your town. Only they will know the intricacies of your market. For instance, my wife and I signed up with a local real estate investing guru from Dallas. Dallas is 40 miles away from Fort Worth (where we live). This guru has heard of the different areas of the Fort Worth area, but wasn’t familiar enough with the area to know that the City of Fort Worth is investing a lot of money in an area known as the Fairmont Historical District. The guru also didn’t know of Fort Worth’s plans to build an “Uptown” area making North Fort Worth a nice long term real estate investment.

8. Ask for a list of people and their phone numbers that the real estate investing guru has helped so you can check their references. If they are indeed as good as they say they are, then they shouldn’t have a problem giving you references of people they have helped succeed. A local real estate investing club, we recently joined, has pictures of their members on the wall with the numbers from their first deal.

9. Get everything in writing! We had a local real estate investing guru who we decided to be mentored by. Everything went really well from the beginning. We checked his references and everyone had nothing but high regards for the individual. However, part of the agreement was that we would partner with the guru on a few deals. We spent many evenings learning from the guru. We were pumped and happy we found him! However, when it came time to actually start doing the deals, the guru changed his mind and decided that he was too busy to work with us on deals.

10. Make sure they have an office. This rule isn’t necessarily a deal breaker for me, but I think it’s something you should be cognizant about. In my opinion, it would be optimal if the real estate investing guru you hire has an office somewhere. It’s always nice to track people if they decide they aren’t going to return your phone call.

11. Instead of straight compensation, structure the mentor being paid based on your performance. Unfortunately, there are a lot of factors that go into whether a person becomes a successful real estate investor. For some people, they are “fence sitters” and will never pull the trigger. I’m not going to pretend to have the answer, but it would be nice if the real estate investing guru was paid based on the performance of the student. For instance, it would be nice if a student agreed to buy their investment houses through the guru or some similar arrangement in exchange for being mentored. The only problem for the guru is that a large percentage of people, while interested in real estate investing, will never do a deal. This certainly puts the real estate investing guru with a big heart in a predicament, but it won’t take very many of those students who never do a deal to not mentor anyone else unless they are paying a large sum of money.

Lastly, if you are doing to invest money in a real estate investing guru, please take the time to read John T Reed’s reviews of the various gurus. He has become pretty famous in the real estate investing community through his reviews of gurus, the books he has written, and the newsletter he publishes.

Have you ever invested money in a real estate investing guru? What were your experiences? Have you done any real estate deals?

Photo by: Woodley Wonder Works

Outside Resources:

Guru’s – A great take on real estate guru’s by Mr. Cheap over at Four Pillars.

http://www.creonline.com/ – This website has an extensive list of articles and a really active forum for questions.
http://www.biggerpockets.com/ – A really large community of real estate investors. I’ve found the forums to be really useful.

Other Posts:

Interview: FairRepair.com
Interview: Professional Blogger
Case Study: My Adventures in Forex Trading (Update: 2/16)
The TED Spread and What It Means to You
Book Review: The One Minute Entrepreneur


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Comments
February 26, 2009

Hi Justin, this is good advice. It’s interesting that even seasoned investors take precautions to protect themselves from jumping in on impulse.

I’ve decided that in real estate, I would do my homework, figure what I want, and only consider properties that meet those guidelines. This way I don’t get carried away by good deals because I’m just not looking for any good deal. I’m looking for very specific numbers.

Daphne’s last blog post..Book Review: The World Without Us

Posted by Daphne
February 26, 2009

This is advice that applies in nearly every aspect of money making. You should always be careful of paying someone to teach you the “secret” tricks they know from being a successful “insider”.

Miranda’s last blog post..Terrry Pratchett and the Art of Making Money

Posted by Miranda
February 26, 2009

@ Daphne – Sounds like you have a great plan! I actually hope to be post my first real estate deal this summer. For now, I am concentrating on Forex until ~ June.

@ Miranda – I whole heartedly agree. There are a lot of scamsters out there. Forex is another big market full of people looking to scam. I focused on the real estate just because that’s what I know and have experienced first hand.

Dustin’s last blog post..Are Real Estate Guru’s Worth the Money?

Posted by Dustin
February 26, 2009

Dustin – I was cheering while I was reading this!!! You made so many excellent points! We’ve written a lot about the courses we’ve taken in the past, and what we’ve learned is that, before you go to any free seminar you need to:
1. Know your own goals first, and figure out what knowledge gaps you should fill
2. Set a max. price on what you’ll spend to fill the gaps
3. Get clear on what you will learn and ensure that it will in fact deliver on what you need to learn. Not every program is suited for every risk tolerance level or every financial situation – even if they try to be everything to everyone! And you’re right – real estate investing is simple BUT IT’S NOT EASY!!! It takes work and it takes time – wealth is not created overnight.

I don’t think your mentor needs to live near you though. What you will miss out on with a distant mentor is local contacts. But, most of the time, you want to build those relationships yourself not use your mentors (then you don’t have to worry about what your mentor is getting out of it for referring you). Also, not having an office, while I understand why you suggest that, I don’t think it’s really something to worry about. Of course, I say that because we don’t have one! But, also because there are a lot of very successful and experienced people that work from home. They also will probably be cheaper to hire because they don’t have overhead expenses of an office. 🙂

Great post!! I found you on MIXX.

Posted by Julie
February 26, 2009

I’ve been to personal development seminars, and seen the same effect take place. People were also running, but usually it was to drop $15,000. Yeah, pretty crazy stuff. 😉

I think having a mentor is useful, and you just need to be careful about the people who aren’t being transparent or honest about what they do.

Nathalie Lussier’s last blog post..Overly Busy: None of My Business(es)

Posted by Nathalie Lussier
February 26, 2009

Thumbs up to your tips on….

1. If it sounds too good to be true, it usually is the case.

2. If they talk about how much money they have and the cars they own, definitely walk away.

I used to buy-in to all that crab. No more!! Like Daphne, I decide what I really want first. I also not let my emotions get swayed too much by sales talk!

Evelyn Lim’s last blog post..How To Get To Enlightenment

Posted by Evelyn Lim
February 27, 2009

Great tips! I think it is also very important to interview potential real estate agents before deciding on whom to hire. Be aware of agents who don’t ask you questions and probe for your motivation. You wouldn’t work with just any agent off the street, and good agents are just as selective about their clients, too.

Posted by Oscar Thibidoux
February 27, 2009

I’ll admit that I am one of those who helped promote the guru to his or her status. I’ve taught their seminars, help organize, train and launch their coaching companies.

Real Estate investing is a long term business not a short term game. You never buy for appreciation and you had better have a good reason for refinancing plus a lot of equity or you will find yourself with a negative cash flow and an upside down propety.

I agree with your comments except for two of them.

First
(7) I don’t have to be an expert in your area, I have to be an expert at assigning you and holding you accountable to the task that will make you the expert in your area.

An example of this would be a review of your city council meeting minutes for the last 90 days and a trip down to planning and zoning to see what the master plan for the community looks like. Where are the transition neighborhoods and what re-development money is available.

Second
John T Reed

February 27, 2009

@ Julie – Thank you so much for the kind comment! You definitely make some good points. We’ve tried people that work out of their home and people that have an office. It’s just my experience that it’s easier to hold people accountable when they have an office.

@ Nathalie – That’s definitely one of the things I’ve learned when dealing with people who are selling something. Figure out what’s in it for them. If you aren’t sure, ask them. If they are the real deal, they’ll be more than happy to justify their costs, commissions, etc.

@ Evelyn – Thank you so much for the comment!

@ Oscar – I agree with interviewing a potential realtor. I’ve actually done a post on that in the past (I probably should’ve included that in this post). I would definitely suggest using a realtor that knows the area. Sure comps are great, but knowing how the area is evolving is essential.

@ Real Estate Maestro – I agree with not buying for appreciation. Lots of people have been getting burned on that the past few years. I agree with your first comment. I think the biggest issue with most people besides action are being held accountable. Education or knowledge is usually not the issue.

Posted by Dustin
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