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Real estate gurus: If only it were so easy


July 10, 2005

Real estate prices are soaring, which means the real estate investment-seminar business is booming.

You've probably heard the pitches - whether delivered live, on tapes, or late-night TV - claiming you can buy property with little work and no money down, or promising that you can get rich in your spare time.

The Fed raised the overnight rate by a quarter of a percentage point on the last day of June, and mortgage rates followed.

The benchmark 30-year fixed-rate mortgage rose 9 basis points to 5.7 percent, according to the national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.42 discount and origination points. One year ago, the mortgage index was 6.08 percent.

The 15-year fixed-rate mortgage rose 6 basis points to 5.29 percent. The 5/1 adjustable-rate mortgage rose 11 basis points to 5.27 percent.

Ah, if it were so easy.

Real estate seminar salespeople emerge in times of rapid appreciation, says Steve Tripoli, a consumer advocate at the National Law Center in Boston. Many offer programs and practices that promise much, but deliver little that is useful.

Not every teacher and book author out there is unworthy, of course, but searching through the pitches is challenging.

Many of the techniques these famous names tout to make you rich are doable, says Phillip Storms, certified financial planner and president of Westmont Companies in Aurora, Colo., a financial firm that specializes in real estate. They simply make it sound easier than it is.

"I haven't used most of those practices, because they're too much work," he says.

For example, a common suggestion is to offer someone full price on a property, but with a catch: The investor puts 20 percent to 30 percent down, and the seller carries the balance for 20 years at no interest. Sounds like you just gave someone full price, doesn't it? Yet the setup lands the investor a tremendous discount.

"There may be a few sellers here and there who will fall for that. But you're looking for a naive seller or someone dying to get out of a deal," Storms says. Try finding them.

"Basically, if you can purchase a property and rent it out or improve it and turn it over in a short period of time, you can make these things work on paper fairly easily," says Nancy Flint-Budde, an independent certified financial planner in Salem, N.Y.

The infomercial kings like to skip any mention that this is a business that requires a lot of investment capital, says John T. Reed, owner of the Real Estate Investor's Monthly newsletter and author of 17 real estate investment books. "With any capital-intensive business, you are riding on a piece of driftwood in the ocean. You have no sail, no paddle. If interest rates go up, you'll get creamed and there's nothing you can do about it."

The folks he found making money at quick turnaround deals owned real estate brokerage firms with a staff whose sole function was to find cheap properties. After the team finds a property, the investor sends in a team of contractors to bring the property up to snuff and quickly put it back on the market. Speed is the key. If you can't turn this around in days, weeks at most, the profit melts away, says Reed.

Storms advises the curious to start their research at the library or bookstore. At least read about some of these approaches before you go into a seminar to see if you have the stomach for it. "And know that the first seminar you attend, the free one , is mainly a repetition of the infomercial. You won't get anything unless you pay for it," he says.

Reed tells his fans to sign up for the local real estate classes at a community college and earn a real estate license. The exercise will help to give a good overview of the law, if nothing else, and it costs far less than the thousands of dollars you could sink into seminars, he claims. Second, join a real estate investor club in your area.

This, of course, requires more time than the infomercial route, and that's music to certified financial planner Stephen Lovell's ears. One way he tests an offer's legitimacy is by the amount of time it professes you will require to succeed. When a person is on the up-and-up, he'll likely lean toward a longer time frame. "I have to convince people there aren't any get-rich-quick schemes that work," he says. "Look at the wealthy -- they build it over time."

Reed agrees.

"This is like any business. If you're well-suited to it, study and don't do stupid things. Over time you'll have success."



Distributed by Scripps Howard News Service.
Email Julie Sturgeon at

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