The ‘Gurus’ are back in town!
It’s that time of year again when the Real Estate Seminar “Gurus” return from their winter hibernation in warmer climes and come to Canada to preach the gospel of ‘Getting rich quick in Real Estate’.
The commercials have already started on radio and TV and also print media, and the pitch never changes!
The formula is always the same:
Wannabe ‘Real Estate Investors’ are initially attracted by powerful and repetitive radio and TV commercials and sometimes print ads that offer ways to make fortunes in the Real Estate business. When the advertised (800) number is called, a slick sales pitch entices the gullible to a Free Seminar. Often exaggerated claims are made such as:
- the ability to purchase properties with ‘bruised credit’
- no money down and/or
- acquisition of properties resulting from foreclosures, power of sales etc. and ‘flipping’ them.
The Free Seminar:
This is usually a 2 hour session where, typically, attendees are seduced by the idea of obtaining wealth beyond their wildest dreams and towards the end of the free seminar comes a subtle sell where participants are persuaded to part with a nominal sum –(anywhere from $700 – $2,000 usually in US funds!) for a 3 day seminar.
The Three-day Seminar:
A hard-sell combination of fear tactics and emotional appeal. On the first day, as an exercise in negotiation skills, you may be persuaded to call your credit card companie(s) and have them raise your limits. The more credit you can get, the better a negotiator you are (!) and the more capital you’ll have in order to put together future real estate deals!
Now you have more credit: With financial barriers removed, now that you have plenty of available credit from the previous day’s exercise you’ll be encouraged to sign up for the advanced course where you’ll supposedly learn everything you need to know to get rich in real estate!
By this time the heat is on and the gullible/unwary are now prepared to take on really heavy-duty credit card debt in pursuit of their dreams. The costs for the ‘advanced’ courses can range from $15,000 to over $40,000, and this is often in US funds.
I have spoken to presenters, many of whom are US and often are not really familiar with the laws in Canada pertaining to financing, down payment conditions, compliance issues etc. and that can be dangerously misleading. I pointed out a couple of facts regarding the above to the staff and in each case, they were blissfully unaware of the laws in Canada.
Caveat Emptor (‘Buyer Beware’) Remember if it sounds too good to be true, it probably is!
Tips to Avoid the Real Estate ‘Guru’ Trap
1. Do your research
Before signing up for any course take 5 minutes to Google the guru(s) and get both positive and negative feedback so you can make an informed decision. Better yet, take the time to talk to past students and see what the pros and cons of the system are, and whether there is expensive advanced training.
2. Be careful who you take advice from
Do you want to take real estate advice from people who make the bulk of their income from investing in real estate, or from people who spend 90% of their time running seminars and selling books and courses?
3. Test the basic techniques before buying the upsell
Never sign up for the advanced course, bus tour, or mentoring unless you’ve made money using the basic material first. If you don’t get enough money making info from the basic course, what makes you think the advanced course is going to be any more valuable?
4. Keep your emotions in check:
The gurus are slick salesmen and will toy with your emotions to get your money. Learn to recognize the sales tactics they are using so you can keep your emotions in check. By doing this you can make logical decisions based on the information you are presented with. Remember, we are all susceptible to at least 2 powerful emotions – fear and greed, and it is these emotions that these clever people will use to separate you from your cash.
5. Just bear in mind:
Having said all of the above, there are some organizations out there that do provide real education for investors, so I am not anti-education, just extremely cautious and skeptical. For the new or would-be real estate investor, I recommend joining your local real estate investment club where most members will be happy to share their experiences with various courses and tell you which ones are most worthwhile.
6. Investment deals:
After completing all the training you should now have the skills to locate, evaluate and close your own investment deals right?
The only problem is doing that can be hard work, and nobody wants to do the hard work. Instead of finding your own deals, Gurus often have great deals ready for you. Since they are the expert, their deal must be the one for you.
After going through all of these courses and spending thousands of dollars you may have picked up some great knowledge, but most are things you can learn by reading books, browsing online forums, or simply networking with other investors in your area.
The following from MoneySense Magazine underscores all of the above:
Following is an insightful article excerpted from MoneySense Magazine from March 2012:
About 20 years ago, a late-night infomercial featured Tom X, a Vietnamese immigrant with a rags-to-riches story. A grinning Tom X stood on a yacht surrounded by girls in bikinis, or in front of a mansion with a fabulous fountain and a Bentley in the driveway. During these cheesy ads, Tom would promise that you, too, could learn the secret to making millions in real estate just by attending his free seminar.
While Tom X is no longer in the real estate business, his legacy remains. Chances are you’ve come across more than one late-night commercial, email or full-page newspaper ad making a similar claim about becoming financially secure through real estate investing.
This is exactly the promise—from a well-known Canadian TV personality—that enticed Fernanda Caranfa, a former teacher, to attend a free seminar in Toronto. Caranfa listened to evangelical testimonials from people who had quit their six-figure-salary jobs after only one year and went on to double, even triple their net worth through real estate investing. The stories convinced Caranfa to charge almost $30,000 to her credit card for the “comprehensive educational system” and 12 months of ongoing support. Within weeks she’d regret her decision.
No one knows exactly how much is spent on these real estate seminars and their “educational programs,” but they continue to crop up in hotel conference rooms across Canada. And judging from the dozens of websites created by would-be property moguls, there are a lot of dissatisfied customers. “These seminars don’t have to be a scam,” says Victor Ricciardi, finance professor at Goucher College in Baltimore. “But they do employ highly questionable ways of parting you from your money.” Here are the most common.
Many seminars plant someone in the audience to guide the group toward a certain way of thinking. “You only need one or two dominant people to influence up to 10 others,” says Ricciardi.
These plants may offer testimonials, ask leading questions and make supportive comments throughout a presentation. Or they’ll inject a sense of urgency by being the first to sign up for such a great deal, enticing others to follow lest they feel left out.
“Don’t underestimate the power of groupthink,” says Ricciardi. Even the most skeptical investor can be drawn in. “Studies show that even risk-intolerant people will become risk takers when engaged in groupthink.”
Borrow and invest, ignore the rest.
Just about every group heartily promotes the use of leverage, whether it’s taking out a loan against your home or maxing out your credit cards. The more you borrow, they say, the more you’ll invest, and the more you’ll earn. For example, according to Don Campbell, president of the Real Estate Investment Network, if you’d invested 15% on a rental property between 1985 and 2005, when Canadian real estate appreciated by 5.1% annually, you would have earned a 33% yearly return.
What they don’t tell you is that these high-debt tactics also magnify the impact of falling home prices. If values decrease by 10% or 15%, you could kiss your equity goodbye. And corrections do happen: between 1981 and 1985, Calgary home prices plummeted by 40%, and steep declines have also occurred in Vancouver and Toronto. They will happen again.
The first one’s free.
Many would-be investors attend these seminars because they’re free. But as Caranfa discovered, the first presentation is just a come-on for expensive seminars and programs that follow.
After attending a half-day free seminar, Caranfa spent $2,000 on a three-day weekend workshop. She thought she’d learn about making money in real estate, but instead she was subjected to yet more success stories and promises that she’d get rich once she’d mastered the “secrets” taught in the full course, which cost a whopping $25,000. While Caranfa was skeptical, she eventually forked over that fee.
Caranfa thought her money was being invested in real property, but it wasn’t. All she got was “a few flimsy books, a couple of DVDs, and the chance to fly all over the U.S. for a series of three-day boot camps on how to invest successfully.” She’d paid almost $30,000 for little more than vague information she could have found for free.
Within 30 days, Caranfa started to ask for her money back and, predictably, she got the runaround. That’s when she called MoneySense. Once we got involved, the program coordinators relented and reimbursed Caranfa. “Eventually I got my money back, but I felt so stupid and foolish.”
But that’s just part of the scheme, says Ricciardi. “Skeptics will often get their money back, but only because this can reinforce how legitimate the program is to other investors.” For programs like this to make money, he says, only a small percentage of people have to be willing to buy into the inspirational message. Understanding how these seminars work will ensure you’re not one of them. Source: Money Sense Magazine:
Please provide your Feedback, I would love to hear from readers concerning any experiences they may have had with the above seminars, both good and bad.