Consider This Before You Call That 1-800 Number You Saw on the Late-Night Real Estate Millions Infomercial

I enjoy reading John T. Reed’s website. He has great insights into many topics from Real Estate to current affairs to military (mostly Army) issues. I found his site when I was following Casey Serin’s first blog. One of these days I plan to get a couple of John T. Reed’s books. I have sort of an essay I’ve been wanting to write for a while, but like most of my writing, it just hasn’t wanted to come together in a coherent fashion. I tend to write off the top of my head, although occasionally I will work on a single post for at least a week. I think John gave me the perfect lead-in to my essay.

Considering the harsh economic news (although please remember, if it bleeds, it leads), it seems that many people will soon find themselves in dire straights. I could be one of them, but for the time being things look secure for the near future, for which I am grateful. When people find themselves in desperate situations, that leaves a willing crop ready to be harvested by, well, cons. There is no nicer way to say it: when life sucks, you are often open to have advantage taken of you. We’ve all been there, and hopefully learned from it.

I’ve noticed lately that Amway is advertising. I see them a lot on the History and Discovery channels, although I admit, I guess I prefer seeing Amway to so many commercials about erectile dysfunction drugs, although that preference is not measured by much. It’s like saying I’d rather drink warm beer than burned coffee. Thinking back to my days as an “Independent Business Owner”, which we weren’t called at the time, I’ve tried to figure out why there are two very difficult to succeed in areas that are always easy to sell to broke and desperate people: sales and Real Estate. John T. Reed sent out an email advertising an update to his Real Estate Investment Strategy series. The blurb for Volume 3 includes a paragraph on Real Estate Myths, and I had to quote the following section of that paragraph:

Since 1970, real estate investment information business has been all but taken over by a bunch of criminal con men and women. They have perpetrated so many myths about real estate that it has become perhaps the only field where your education needs to include deprogramming of the kind done on cult members.

I’ve you’ve read many of my posts on this blog, you’ll notice that I think little of the lottery, and I think less of “Get Rich in Real Estate” infomercials. When I got married, my wife was used to sleeping with the TV on. She liked to watch the news, then Leno, except that I can’t sleep with Leno on. There is too much noise, with the clapping and cheering and other stuff. I’ve found that I can fall asleep watching the Discovery and History Channels. I used to like CourtTV, now TruTV, which is not available on our cable package any longer. Unfortunately, about 3 AM (4 AM for History) they switch over to infomercials. I often wake up to somebody pitching some course or book promising that you can make millions in Real Estate with no money down, no experience, and apparently no real effort. These infomercials almost always take place in a fake talk show format, with testimonials from people saying some variation of “Thanks to (guru x) I make $20,000 a day, and I live in a mansion.” Research will show that these people are NOT customers of the guru, but either friends and family members or employees or actors being paid to say such things.

I’ve stopped keeping track of the gurus who appear on these infomercials. I know I’ve seen countless hours of Carlton Sheets and John Beck during nights when I couldn’t sleep either from being sick or the kids being sick. I can’t recall having seen either of them lately. One morning several weeks ago I woke up and heard a new one. I was trying to get back to sleep, so I wasn’t watching the TV for most of what I heard. The guru made the usual claims about how wealthy he was and how he made it all by following his system in Real Estate. He gave the usual “tell you what you want to hear” claims about how you don’t need much of an education or experience. One quote I remember is “Somebody asked me if I had an MBA. I said ‘I have a Major Bank Account!’ “ Then I remember him making some statements about “God has a wonderful plan for your life.” I’m obviously not going to disparage that remark as it’s probably true in at least one context, but using it to sell anything other than Rick Warren merchandise makes me wonder about the motive of the salesman. He also showed a picture of a house that he claims he bought for $11,000, and remodeled without getting his hands dirty since he paid other people to do the work, and by the way, he helped his painter become a millionaire in Real Estate shortly after that job was completed at an immense profit.

That leads me to wonder why is it so easy to convince broke and desperate people that Real Estate and sales are two areas that it’s so easy to get “rich” in with no experience and no money down as long as you invest a small amount into buying a specially prepared product telling you the secrets that those slaving away in such professions either don’t know or don’t believe?

I see this also working to a point in investments, but fortunately most people are too scared (and rightly so) to jump right into stocks. What happens to most people who buy into these systems (John T. Reed’s website backs me up on this) is that they find a bunch of fluff and motivational material, but not much substance. That or the material focuses heavily on the acquisition phase but make no real mention of what to do after you buy the property. Great, you found a piece of trash house at county auction and bought it with “no money down” which means you’re leveraged out the butt and now have to cover a mortgage payment and taxes on your new found investment property. Some of these systems even involve advice that is fraudulent and illegal, such as “liar loans”, or claiming that this house will be your primary residence even though you plan to “flip” it as soon as possible. But the advice, if it even is somewhat solid, stops there. Not much on fixing and selling, other than feel good type writing about those parts of the transaction. If you call to complain, some Real Estate gurus have operators who will try to sell you more products. “Oh, that’s our entry level product. You have to buy the advanced course.” Some are even known to start charging your credit card without your permission, which either results in you being ripped off, or a long battle to get the charge reversed. John Reed maintains his ratings of most gurus (but not all) here. He also maintains a “Real Estate B.S. Artist Detection Checklist”. The checklist will be helpful to you in evaluating the claims of salesmen (I think this has a much broader application than Real Estate infomercial products) that you might encounter.

What happens in multi-level marketing is similar. You get invited to a meeting, they ask you what your dreams are, incorporate those dreams into some kind of sales and marketing plan, then convince you that just by “buying the products that you would use anyway from your own business and teaching other people to do the same, you’ll be fabulously wealthy within 2-5 years of about 10-15 hours a week of work, time you’d blow watching TV anyway”. It sounds really simple. Then once you get in, you’re told that you need to plug into “the system”, which consists of tapes and books and functions and seminars that you must purchase in order to be successful. Then you’ll hear testimonies about other people who “paid the price” by driving all over the place, showing thousands of plans, getting rejected many times, not sleeping to show plans and go to functions. Somehow in the middle of all this, you’re showing plans to other people telling them about how they too can get so rich and live their dreams in 2-5 years with only 10-15 hours a week of work and somehow you’ve forgotten that you put in more years than that and many more hours each week, in fact you’re constantly told to put in more hours than that “building your business” and you never stop to consider that somehow the 10-15 hours a week isn’t accurate and sounds like a bait and switch scam. Your friends and family will have obviously told you no, and you’ll be told through “the system” that it’s because they don’t have a dream or they’re losers. Anybody who tries to talk you out of “your business” is a dream stealer. Of course, none of your “business support” materials teach any sort of profit and loss calculation, so you’re throwing tons of money from your day job into “your business” and seeing no return, but when you complain, your upline tells you that you’re just “paying the price” and you need to keep “dreaming your dream” and other mindless platitudes. Assuming that you give up (trust me, 99%, including me do), you’ll believe that you failed; that you just could
n’t keep your dream alive.

Let’s assume for a few moments that Real Estate and MLM (Multi-Level Marketing) are perfectly honest, legal, and ethical systems and work exactly as advertised. Are they really applicable to everybody? I found out real quick when I was in an MLM that I absolutely HATE cold-contacting, but after all of your friends and family tell you no, that’s all that you have left. As far as home improvement (if I wanted to “flip” houses), I can change light bulbs and hang curtains, but I don’t really like doing more than that. It’s just not me. I’m no good at taking care of my yard. Assuming that each works as advertised, there’s a reason why I don’t work in sales or Real Estate: I’m either no good at them or have no interest in many of the activities that they involve. Just because a profession is honest doesn’t mean that everybody will be successful at it. I love working on computers, and I know people who can’t stand doing the slightest maintenance function on them. Those people should not be working in IT.

To be honest, at one point in my life I considered becoming a minister. That’s a perfectly honorable profession, or at least used to be. I thought being a minister would be great until I realized that among other things I’d have to do funerals. I don’t care if the first three letters in funeral are f-u-n, they are no fun, especially in large families where they can be an exhausting several days of viewings, then the service, then the interment, then some kind of wake or lunch. After my wife’s grandfather died and we went through all of the activities surrounding it, I got home, laid down in bed, and passed out for 2 hours in my suit from the exhaustion. Handling all of those activities with small children and other family members while dealing with your own grief or whatever feelings you have for the deceased is quite an ordeal. There was no way I’d want to have to handle funerals professionally. There are also things about being a minister that I don’t want to have to deal with. If I could just preach and teach some classes, then cool. But counseling and church politics, even in a good church, are tasks that are best left to other people while keeping me far away from them. Even if these Real Estate gurus and Multi-Level Marketing salesmen are selling good systems, you’ve got to take a step back and ask if you’re even fit to work in that system. Just like being a minister, there is a very good reason why I don’t work in sales: I can’t stand it.

It’s easy to look at people who are already wealthy and assume that it was easy for them. When you’re broke and desperate, or even just stuck in a “rat race”, it’s easy to hear and believe that you can have whatever you want with just $150 down and 10-15 hours a week part time. The fact is that succeeding at anything takes hard work and sacrifice. I am not an astronaut, which is obvious. There’s actually a simple reason why I’m not an astronaut: when I heard about how hard you have to work, and how many math classes you have to take, I decided not to pursue that path. I was still in high school when I made that decision. I honestly believe that I could have been an astronaut today had I wanted to make the sacrifices and go through with the hard work required. I am not a lot of things because I didn’t want to work and sacrifice for them. On the other hand, the meager success I have enjoyed to this point is the result of hard work and sacrifice. Caleb was 2 weeks old and Joshua was about 13 months old when I met with the admissions counselor at the University of Phoenix. For the next two years, I busted my butt working on my degree with a full time job, and exhausted wife, and two children who were not sleeping through the night. It was hard work and I wanted to quit several times, but I didn’t. I now have a Bachelor’s degree and a better job, and a better chance for advancement in my career than I did before that. There is no way I would blow smoke at you by saying it was easy, but I will say that you can do it IF you are willing to work hard, invest the money (ugh, student loans) and make some sacrifices.

My wife and I could probably have a better standard of living. However, letting her stay home with the boys was important to us. For that, we live on my income, which I worked hard to increase. We drive paid for minivans. For several years, we took our living room furniture from the curb or from free posts on Craig’s List. We just bought a used living room set for $300, our first non-throw away set in years. We probably could have financed some $5000 living room set from a high-markup furniture retailer, but we sacrificed in that category. We don’t have digital cable, and we still have a 25” and a 27” huge CRT TVs. Meeting our goal of keeping my wife home with the kids led us to delaying the home theater and other luxuries.

I do know people who have been successful at Real Estate. They do a lot more than “no money down!” deals. They work very hard to find properties worth investing in, fixing them up, and reselling them. I know people with apartment complexes. I don’t ever want to have to deal with that. It’s hard work. One friend of mine does the best he can to stop his renters from finding out that he is a Christian. He has actually had renters who were months overdue and in the process of eviction claim that because he is a Christian, he has to let them stay there without paying. Note, I am paraphrasing.

This post is losing track fast. I guess if I could leave you with anything, it would be this: real success and real wealth do not come from buying a $200 kit from an infomercial that was on at 4:30 AM, nor do they come from somebody approaching you at the mall saying “Hey, you’re really smart. I could use somebody like you in my business. We’re having a meeting Thursday”. Real success takes hard work and sacrifice, no matter what it is. There are no shortcuts. Anybody who tells you otherwise will make more money from you for telling you that than you will ever see for giving that person your money.

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