Not too long ago, people involved in rental real estate wanted to find a way to supplement what they were doing by getting more of the general population interested in purchasing residential property and renting them out as a source of income and asset appreciation. But, how were they going to do this? Getting strangers involved in one’s personal or business LLC real estste transactions could be hairy… and making investors out of the general public would lead to a lot of liability issues.
What then? Well, it would have to be something that would appeal to most Americans… something that would entice entrpreneurs and those likely to have financial resources… and the best part? something intangible! … like a concept or an idea… oh, I know… how about the opportunity to own income-yielding, rental real estate?!
Yeah! You could invite people in the area to free workshops on how to do it… and they would come!
But, what happens at these workshops? Better yet, if you’re still reading this article, how could you spend thousands of dollars on real estate and own nothing?
How To Spend Thousands On Real Estate And Own Nothing!
We know that no one ever really gets rich from obtaining their degree and working in a cubicle. Although rare, some people have taken a very simple blueprint for success, exploited it, and made real money. We all aspire to higher levels of financial success.
Because of this, we make it easy for real estate professionals to prey on us. We go to their workshops, buy into their programs, and lean on them for guidance. I see it time and time again… from real estate to stock market investing to buying those e-commerce websites.
Does that mean that by attending these workshops that we will become a real estate professional or an investment guru or a webmaster too?
So, Why Real Estate, anyway?
Books like Rich Dad, Poor Dad told you to invest in real estate. You could acquire an asset that was appreciating in value, could provide an ongoing source of passive, residual income; it could provide certain tax reporting and bookkeeping advantages, as well as really help the community to refurbish a home in their neighborhood. Real estate has been a major source of wealth in this country for centuries.
So… why aren’t you running out and canvassing your neighboring towns for deals this very moment? What are you waiting for?
It’s probably the same reason you don’t own a business. These things require a great deal of financial management, planning, and industry knowledge to carry out. There are barriers to entry — and a strong likelihood of financial loss. So, at this point, it is merely a dream.
Ok, so what exactly are the real estate people selling then?
Are they selling tips and techniques to buy real estate?
No. They are selling the “dream” to you. They are telling you that you can escape the “rat race,” and have the opportunity to enjoy endless hours of quality time with your family,” and most importantly, to “live the good life.” And you are so desperate to make a change in your life; you’ll do whatever they tell you to. You’ve want to be that “regular joe” with the young, trophy wife, sitting poolside somewhere in Aruba… So, you buy into someone else’s money-making system.
…only to end up ashamed and disappointed.
The funny thing is whether it’s the late night infomercial, the online ad, the billboard, or” the magazine… you’ll buy another and another “get-rich-quick-scheme.” It’s inevitable. Of course, you’re too embarrassed to share your mishaps with others… and end up suffering in silence. They depend on people like you to be quiet… like a self-imposed gag order.
It probably starts with talk radio in your area. Usually on the AM dial. It will be a channel that may discuss things like owning gold, real estate, or being in the stock market. The guys running the show come off being overly simple and uncomplicated – dumb even. Like you, perhaps? Not like bankers or CEO’s with droves of discretionary and/or disposal income. They go on and on about “what a great time it is to buy real estate,” and how it easy was for simple folk, like them, to be successful – all while you are on your way to your thankless, dead-end job that day.
Free is one of the sexiest words in any language. Free turns heads and stops traffic. At the Free Seminar (well, the pad and pen are free), you will find out everything you need to know to be successful in real estate. (Yeah, right!) First, it’s the “buy-in.” The speaker makes themself out to be “just like you,” and “was going through the same “corporate trappings” you were.” Now, they want to help you escape your bane existance.
Why Do They Want To Help Me?
Towards the end of the seminar, it becomes clear. There is a “mentoring program.” And to be eligible, you must be interviewed. They state that they are looking for the “right people” to both mentor and partner with. Who do you think is this right person? — That’s easy! The right person will have excellent credit, high net worth, and be somewhat starstruck by interacting with the radio personalities they have heard so often on the air. They become so enamored with the idea of being someone’s landlord, the part about paying ten thousand, twenty thousand, thirty thousand to be part of the mentoring program is immaterial.
The real reality is that there is not that much positive cash flow after you pay for the property’s mortgage and address any business expenses that month from maintaining the property. How much is positive monthly cash flow, typically? Maybe$150 to $400 at best… if that? How many homes would you need to own then to live this “dream”? 10? 50? 100?
Up until they flash the big dollar amount on the white board… you are basking in the jokes & comradery. And then it hits you!! You are not talking to real estate people!! You are talking to marketing people; who let’s be honest, have no real interest in your success. It’s all about the script and closing the deal. The deal being the mentoring fee. Whether you succeed or not is irrelevant!
So, what are you really paying for then?
Think about this… Don’t you think there are more people actually “buying the dream” than “buying the house?” Of course! Now you got it! So, yes, you can spend thousands on real estate — and own nothing!
Some buy properties of their own, but after the large fee you paid for mentoring , it will require many years of renting to recoup that. Heaven forbid you should have a property that sits with no tenant! Or a property that requires ongoing maintenance? Or a property that could only move at a reduced rental amount!
And the mentoring? The period you have available to work with your new team of experts is a matter of weeks. How much experience will you get from your first house? — And what if you haven’t located a residential property that appeals to you? Will they still mentor you on someone else’s asset in the group?
If you’re looking at getting into residential rental real estate, avoid the “mentoring” and obtain much more affordable resources on your own. Keep the money for you… and your first down payment.
Have you been to some of these seminars? Is that how you felt when you walked away? Please comment below.