Late night TV these days is rife with infomercials on how to make “huge profit$” from real estate with “no money down,” no credit, no experience, and basically no brains needed.
Now, there seem to be fairly different methods pitched on TV. One I saw took great pains to deride the “no money down” methods in favor of its own method, which had something to do with using something called “notes” and their website to “tap into the real estate’s cash flow,” whatever the hell that means.
I must admit, my unemployed self was tempted to check these things out. And that’s the purpose of these infomercials, of course: to rope in desperate people like myself. But I have to wonder: what sort of snake oil are these people peddling, anyway? What methods do they tout? And what are the inevitable barriers to financial independence in these methods do they not tell you about?
There is an infomercial with a guy who seems to have some growth-hormone deficiency, or other medical condition (he looks about my age, but is obviously quite a bit older than 18), that is selling a very similar system. Instead of real estate, his system uses auto-auctions. How you could buy a car from an auto-auction and drive it off with no money down is beyond me, though.
I had wanted to make a thread about it but I forgot, I’m sure they work on the same principal though.
My girlfriend ordered one of those “buy a house for $1 and sell it for $100,000” programs and received all this crap in the mail but to continue with the program and to find all the secret houses for sale, she needed to fork over $3,000.
When an operator called our house to find out what she wanted to do, she said she wanted her money back.
The operator called her a broke loser who couldn’t find a real job and that she needs money to make money. I got on the phone and he told me I couldn’t satisfy my woman and I’m a broke bitch.
KingFriday: How ironic… One of the 'mercials emphasizes that they don’t think that “spend money to make money” thing is true, several times!
And I know that these things aren’t nearly as swell as they say they are. What I’m curious about is the methods they espouse. I know that there are many “scams” that depend on you paying for something you can find yourself for free. I was wondering if these real estate methods was an example of this or what.
My plan? Buy a dump in the city for 20 grand, get it to pass inspection, rent it out to a section 8 tenant, have the government pay for my house. I’m sure there’s more to it, but that’s how I want it to work.
Carleton Sheets has the most successful infomercial running, and it seems like it has been running for the past ten years. Google his name (it’s often misspelled Carelton Sheets or Carlton Sheets) or better yet, Google his name along with the word “scam” and see how many people he’s pissed-off.
Real estate investor John Reed has done a little review of Sheets’ works. In fact, Reed has a bunch of no-nonsense links about real estate gurus and infomercials on his web site.
Reader99: Absolutely fascinating stuff. Thanks for the links!
I already knew that these programs were fraudulent… I guess what I was wondering is whether their advice had any iota of value (like the book that’s also pitched on late night TV with that weird guy on how to get government grants - useful and accurate, but you’re overpaying for the info). Looks like the answer is “no.”
And here I hoped it wasn’t ALL outright lies. Not that I’d shell out the cash even if it wasn’t, but I could have at least found out how to get the useful info for less/free. Oh well.
Few, if any, legitimate real-estate sellers will even consider a buyer trying to use one of these programs. My mother is a professional landlord who has bought and sold many rental properties, and will generally laugh one of these people right off the phone. She has no problems carrying a note, but to her, the presence of a down payment indicates that the buyer is serious about wanting to buy and then rent out the property. It takes a lot of work and money to keep rental properties habitable, and to her, it’s not worth the time and hassle of dealing with someone who thinks it’s a turnkey operation.
That said, there is good money to be made renting out properties, if you do it right. Sheets, et al. are not doing it right.
I think the bottom line is that hard money = hard work. Unless you are one of the .0000005% (or probably close to) of the population who was born into a rich family or very lucky. Unfortunately, we only hear about those people getting it so easy, instead of the millions who work their tales off trying to pay the bills. Just my .02
As with all get rich quick scams, these companies try to lure the poor, desparate, greedy and ignorant. Basically, they try and convicne you that there are some quick and easy tricks that those ‘Wall Street Fat Cats’ won’t teach you. They are somehow powerful enough to make anyone a millionare yet simple enough for anyone to use.
One method I have heard is “flipping” properties. IIRC, you go out and find a bunch of distressed properties, buy them on heavily leveraged financing, fix them up and then sell them before the mortgage is due. Supposedly, you can avoid taxes by immediately ‘flipping’ the profits into a next property.
Of course, this whole thing assumes a lot of stuff like being able to find a buyer when you want.
I’ve read a few books by people who have done some clever real estate tactics involving obtaining property for a song and getting incredible returns on it. I seem to remember quite a few of these methods discussed in the “Rich Dad, Poor Dad” series - that guy had a lot of talk about using creativity to make money. That series does tend to go against the “it takes money to make money” mindset, but those cases he cites often use creativity and doing one’s homework as a substitute for large amounts of investment capital.
If you want more detailed information on making money in real estate, there’s likely to be a few good books on it at the local library. Here are two genuine, viable strategies for making money in real estate with minimal cash investment:
Find a would-be landlord or investor who is willing to pay a finder’s fee for people who can sniff out good bargains in real estate. Find the best deals for this investor.
Find a property that for some reason is being sold way below market value (some foreclosures are good deals, some aren’t), find some sort of loan that allows you to put little money down (out here, the USDA Rural Development program might work), spruce it up a little, and sell it.