Real Estate Gurus are Full of It

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At the ripe old age of 18, I started real estate investing the same way a lot people do: I read a bunch of books by real estate gurus and become convinced I would be able to make millions in just a few short years.

It took my adolescent brain a few years, but I finally wised up to something:

Real estate gurus are full of it.

A real estate guru gets paid when you buy whatever they’re pitching.  It doesn’t matter if they’re selling books, tapes, programs, or games: at the end of the day, they get a paycheck when they convince you to buy from them.  Their incentive isn’t to give you sound real estate investing advice.  Their goal is to make investing lucrative and easy.  The more excited they can get you, the more they sell, and the more money they make.

They couldn’t care less if you actually succeed.

Let’s take a glance at some topics gurus love to talk about and see if their logic makes sense.

Related: The Real Estate Guru Trap – How It Works & 4 Ways to Avoid It

No Money Down

Real Estate Guru Logic – “Don’t have any money?  No worries!  You can buy a home with no money down!”


A general guideline thrown around on Bigger Pockets is the 2% rule: if the monthly rent is 2% of the all-in cost, it’s a good purchase.  Using some typical numbers, here’s what the monthly cash flow on one such home might look like without any financing.

2 percent rule without financing

If you can find this ideal property then you’ll be getting $843 a month.  That’s over 10% return annually.  Not too shabby.

How about with the “no money down” option.  Let’s say you get a 80% loan with 6% APR and 20 year amortization.  For the remaining 20% you get 6.75% APR, 20 year amortization and 1% PMI.  Here’s how the numbers would change:

2 percent home with no money down

Wow, a whopping $125 bucks a month.  That really doesn’t leave much room for error.  Keep in mind most people opting for the “no money down” don’t have any spare cash.  A faulty furnace could force them to start buying cardboard.

Real estate guru made me homeless

Some gurus even have the gall to tell you to save your income until you have a reserve equal to six months’ rent.  Think about that “logic” for a second.  Setting aside $125 until you have $12,000 will take you 8 years!

Related: Should You Pay For a Real Estate Investing Mentor? Here’s My Strategy…

Property Management

Real Estate Guru Logic – “When you’re first starting out, manage your own property.  You save a lot of money and learn the ins and outs of real estate.”


When you’re first starting out, you probably have a full time job.  Here’s some things you’ll have the pleasure of handling yourself:

  • A tenant drunkenly locks themselves out at 3 AM – Hope you didn’t want 8 hours of sleep.
  • Resident isn’t paying – Do you have personal days saved up?  Cause you’ll be using one to go to the courthouse.
  • Vacant home – Your resident has moved out and now you need to find a new one.  Either you’re taking more personal days to show the property or your evenings and weekends are going to fill up pretty quick.

Buying You First Investment

Real Estate Guru Logic – “Buy your first home today!  Save the income and you can buy a second, then a third, until you’re a millionaire.”


Let’s introduce another useful guideline: the rule of 10.  If you see 1000 homes online, you’ll want to visit 100.  If you visit 100 homes, you’ll make an offer on 10.  If you make an offer on 10, you’ll close 1.

Let’s say it takes 10 minutes to check out a property online, 1 hour to see it in person, 5 hours to make an offer and negotiate a price, and 20 hours to close (after financing and inspections).  That’s 336 hours to buy your first property.  Two months of 40 hour weeks!

Is that actually worth your time?  Probably not.  If you bought our example house with no money down, you’ve invested 336 hours to make $125 a month.  You can get that much income by working one evening a week at a job paying $12 an hour.  Plus the joy of job satisfaction.


Where Am I Gong With This Argument?

You might be wondering: Kenny, everything you’ve said seems to be arguing against investing in real estate.  What’s gives?  Don’t you invest in real estate?

I sincerely believe investing in real estate is one of the best ways to grow wealth and economic independence; however, there’s no reason to do it yourself.


Investing in real estate makes a lot of sense when you’re big.  When you’re just starting out, it’s really time consuming and it’s just not worth the hours you have to put into it.

When you’re bigger, a lot of things become easier and more cost effective (economies of scale).  Here are some example:

  • No full time job.  It’s amazing how much more you can focus on real estate without a 9-5 job.
  • Dedicated contractors.  Having people that solely work with you means you get better rates and prompter service.  We currently keep over 30 contractors busy year round.
  • Wholesale buying.  We purchase almost everything for a fraction of what a hardware store sells it for.
  • Easier to find deals.  Once you have built a solid reputation in an area, deals just start falling into your lap.  Not to mention you know the area and what you’re looking form so analyzing them takes less time.
  • In house property managers.  When you reach this point you are able to maintain control over the operation without having to pay third party rates.

Wrap Up

Real estate gurus make a lot of money convincing you that if you just use their system/network/financing/etc money will magically appear and you’ll be out of the “rat race” in no time.

Don’t buy into what they’re selling (literally in this case).  Until you reach a sufficient size, you’ll be pouring blood, sweat, tears, and money into the operation for very little upside.  If real estate investing is truly your passion, then go for it!  If you’re looking to make a quick buck on the side, you’re going to be disappointed.

Go find someone who has already paid the iron price and find a way to invest along with them.  Let them work for you.  If you really want to do it yourself, learn everything you can from them and strike out on your own when you have enough momentum.

What do you think?

Photo: Jose Zaragoza

About Author

Kenneth Estes

During Kenny's decade in finance he bought many single family rentals in rural areas, as a hobby. Along the way, he talked some brave souls into joining him as investors and recently retired from finance to take his hobby to the next level. Find more by and about Kenny on his personal blog and his recently created twitter account!


  1. Stuart Stevens on

    Wow, I must be crazy. I feel that your analysis is flawed.

    Where are real estate taxes 5% of the purchase price? In California they are around 1.3% of the purchase price. In most states they are 3%.

    You present cash flow and call it income. Your all in example is using a 20 year loan and including principal payments.

    $125/month for $0 investment is a very high return (oo). By the way, if you include taxes then you have a negative cash flow.

    The ROI based on a 20% down and 6%/yr interest is 27%. If you have $100,000 and do five of these properties then you are tripling your money every three years. With no money down it is taking over seven years to double your money. Which is better?

    • Kenneth Estes

      Thanks for the criticism!

      Taxes definitely vary a lot by locale. The number here are just to give you a flavor. That said, a 10% return on investment for rental property without financing isn’t too far off from what we’re getting “in the wild”.

      You’re correct that, above a certain threshold, the more financing you get the higher the return. The problem is your risk skyrockets as well. I have another post on my personal blog elaborating on this point further.

  2. Great article. I always suggest to newbies before they spend dough on courses to scour the Internet, get on BiggerPockets and use the FREE library resources to check out all the “gurus” books available

  3. Great article. Gurus make the majority of their money (if not all) on selling their books, CD’s, hyperlinks, programs and mentoring. I have had first hand experience doing deals and attempting to do deals with so called gurus. I can tell you that not one of them ever put the money together to get a deal done….not one. I had to do this every single time. Don’t ask them to find the cash folks for any deal. They won’t find it! You have to find it and put it together, whether it’s your own cash, someone else’s or a combination of both, it’s up to you to get the deal done.

    Just saying from first hand experience!

  4. Kenny,

    The problem your having with Guru’s is simple, you have the wrong one.

    Let me help you out, I have a no money down, no money out of your pocket, massive cash flow property for sale. As soon as I park my $5 million dollar yacht, fire up my million dollar Bugatti we can talk, and all of this is a simple repeatable secret method.

    All you need do for a limited time only is prepay the non refundable totally guaranteed or your money back investment in your future of $997. Or you can leave this page and go back to your loser life and spend the rest of you life in your mother’s basement.
    Don’t miss this once in a lifetime opportunity to get rich with no effort on your part, the money will literally be thrown at you in buckets.

    Btw, if you fail miserably it’s totally your fault for not implementing my system 100%.

  5. Stuart Stevens on

    Just for the record, I agree that the guru’s are more interested in your money. I just disagree with your examples. I went to one of the motivational three day seminars and spent one day. 90% motivation, 5% humor, 5% possibly useful information. – lots of useful information

    $997 in the mail!

  6. Karin DiMauro on

    I agree that the gurus should rightfully get jabbed for their oh-so-predictable shtick. However, I wouldn’t say that all of them are bad. I had a great experience at a 5-day boot camp that was well worth the $1,500 price and got me off to a great start. There was upsell during the event, for sure, but there was meat and teaching as well. I chose to attend the boot camp b/c this particular person had given actual useful details during a talk at our REIA meeting and then during a one-day seminar … it wasn’t an informercial (those are the ones I tune out).

    I think it’s like most anything – keep your antennae up to determine which ones are full of it vs which ones have some real knowledge to pass along. For me, the boot camp gave me a great baseline of info, and then real-world experience combined with ongoing support from Bigger Pockets has been the key to filling in the gaps.

    But probably 85% of them … yeah, jab away! 🙂

    • When I hear the word “Bootcamp” I know I am going to get a kick in the wallet.

      I attended only one bootcamp it was nearby in Philadelphia, the NLP was flowing fast, it was like Tony Robins wrote the script, and near the end came the big push. Not to go out and succeed but instead to buy an additional $2000-$10,000 in services. A young man sitting next to me got to purchase the whole ball of wax for $10,000 split between 3 credit cards.
      I could not let him make that mistake, and just about physically held him back. Later at my direction he checked Ebay for the courses finding them for sale for $300.

      • Karin DiMauro on

        I hear ya. I went to one last fall that wound up being a complete crock and a sell job from various speakers the entire time. Fortunately, the so-called boot camp only cost me the airfare and hotel (the fact that it was a free boot camp should’ve been my first clue about what I was in for! Duh.). And I’ve gotta say, as irritated as I was, I still picked up some tidbits and met some interesting people. And I didn’t buy a thing. My approach is, if you don’t give me any details now, why am I going to buy your stuff and trust that you’ll teach me something then?

        Bottom line: I don’t mind paying for a boot camp or “education” if that’s what it really is. But you’ve gotta wade through a lot of BS to find the true teachers.

  7. Never ever ever give anyone money to teach you until you can:
    1. prove that they are successfully doing what they are teaching (yes, a number of “gurus” say they are doing it, but actually aren’t)
    2. talk with clients who are successfully using the product they sell (it is surprisingly rare to find anyone who is actually successful at using guru products they pay for)

    As in all things, buyer beware. With all the free information and events today, you probably don’t need to buy these products. I do, however, believe you need to pay a mentor for coaching. No one can be truly successful without being taught what to do and how to do it. That is true in any industry and, if you want to be making 6-7 figures per year consistently in real estate, it’s pretty tough to figure that out on your own.

    Thanks for the post, Kenny.

    • Kenneth Estes

      Thanks for the comment Karen. I personally am not the type of person to pay for a mentor. Probably more of a function of starting so young (head strong), but I read a bunch of books and then just did it on my own. Along the line I picked up quite a bit though.

      If I had to do it again I would certainly find someone to invest in/with and pump them for information.

  8. Entrepreneurs must motivate themselves through thick and thin. Motivation from others helps only a small margin because ultimately when you leave that “three day event”, what happens after that is entirely up to you.

    Gurus will always leave out pertinent, practical details also. You’ll get some information, but never the whole picture. The whole picture only becomes clear after you’ve been in the trenches for some time. Unfortunately for most, they don’t have the resolve to be in those trenches and get kicked and make mistakes before they see results. Gurus make anything and everything appear ideal and sugar coated, with their sprinkle of humor etc. Real life isn’t like that. For those that disagree with me, they simply haven’t done the work to notice these facts. These are not my opinions, just facts.

    These folks (gurus) do have value, but bear in mind that you will learn only a small amount of useful information from each one. It’s up to the individual to put it together in their own system and make it work.

    • Michael Dorovich on

      Now here is a truth which I have not seen in print anywhere before. It all comes down to your daily habits, the things that you actually do each day no matter what else happens… funeral, weddings, and natural disasters included.

      It is self-discipline and self-motivation and self-correction that keeps you on track for the long haul.

      You mean Muhammad Ali wasn’t joking and smiling every minute he was training? You mean he wasn’t a champion the minute he stepped into the gym, stopping for autographs in between training? Rarely do you hear that he said “I hated every minute of training, but I was determined to live the rest of my life as a champion.”

  9. Michael Dorovich on

    You mean you can’t find 100% owner financing for 30 years with nothing down at 20% below value on a property that needs $50 in repairs and will instantly rent for $500 per month cashflow? Are you sure…? Because that’s what I read…

    • Lol! You may find something like that Michael, but it’s tough. When we find houses, we always buy them well below market value but that’s because they do need usually a fair amount of renovations. After putting that investment money in, they are resold for a healthy profit. Another approach which is simpler and in my view more effective is don’t do the rehab work. Just buy well enough below market value, take repairs into consideration to leave room for the rehab investor to profit and give them what they want (a value deal with an upside they can profit on). You make money on the spread. This approach does work nicely.

      • Kenneth Estes

        Alex, sounds like we have a pretty similar business model, the main difference is we usually hold the property instead of flipping it.

        It always astonishes me how much below market value you can buy a home for because a lot of investors/buyers can’t look past the blemishes on a property to see the opportunity.

  10. I could not agree with you more Kenny. I just had a discussion with a friend who told me that a mutual friend spent $10,000 on a REI guru’s product. Nuts! But you know, we all have free will and I’m not mad at the “guru” for exercising his right to sell his product regardless how worthless it will probably turn out to be.

  11. Kenny, I must say I totally disagree with this comment of yours:

    “It always astonishes me how much below market value you can buy a home for because a lot of investors/buyers can’t look past the blemishes on a property to see the opportunity.”

    I’ve heard a variation of this theme from others, which goes something like this: “Most buyers are turned off by a little dirt and something broken.”

    Kenny, I think it really depends more on the current environment and the market cycle than on buyers not being able to see past blemishes.In my experience, there are always plenty of buyers who can see past the blemishes, enough so to represent fierce competition. I made an offer recently on a run down, junker property being sold by an estate. Asking price was $35k, and they had over 30 offers the first week. It galls me when people suggest that if you have the courage and foresight to look past some blemishes, you can do really well. I

    • Kenneth Estes

      Interesting Edwin. Sounds like we’re in very different markets. My focus is rural areas, where are you investing?

      Don’t get my wrong, a home with “blemishes” will still have people looking to buy it, but a lot of retail buyers and new investors won’t be interested. That in and of itself increases the chance of finding a deal.

  12. Catherine Coy on

    Hmmm…I personally purchased two triplexes in 1993 with no money down. Zip. Zilch. Nada. I owned them for several years and received significant benefit from positive cash flow and tax advantages. I don’t know why this was possible when everyone here says it’s impossible but I did it nonetheless. Oh, and I did it because I attended a “guru” workshop and he told me I could.

    • Kenneth Estes

      Congratulations on the investment Catherine. Although you can indeed come out ahead with no money down, the risk/reward ratio is really high.

      To my mind, being successful with that type of approach has a lot to do with luck and is a rather large gamble.

  13. Lets just say I wish I found bigger pockets before rich dad.
    The first lesson I learned from them is: (product) prices are negotiable. Some other rich dad followers were unhappy with what they spent after hearing what I paid. And now I am better understanding the financial and emotional value of tough negotiations beyond the basic investment. I started learning ate age 20, I’m 26 now and am effectively the asset manager of 9 units. Albeit with much room to improve both my performance, and theirs. If you’ll excuse me, I must continue cutting my teeth on the errors of my past.

    • Kenneth Estes

      Congrats on putting in the time to break through Remrie. Ironically, Rich Dad was my go to when I first started. It did do a good job at getting me excited to invest, but it divorced my expectations from reality which took me a long time to get past.

  14. Kenny – I think you’re dead on accurate. Sure we can hammer your examples piece by piece; but anyone who’s done this a while knows that a vacancy factor and a maintenance factor in a pro-forma are best educated guesses and only really work out once you’ve got a large number of properties across which to spread those costs. I’ve found through research that most of the gurus selling books haven’t done much or any real estate and that is why so many of their examples and logic are flawed. I like Ray Alcorn’s book – the Deal Maker’s guide – as he is an “anti-guru” and has done millions of dollars in deals. It is a good chunk of change but it’s the best thing I’ve ever read on real estate.

    To your point on finding someone who has done it repeatedly and repeatedly well and invest with them and learn everything you can from them; you are exactly right. One of my business partners likens it to flight school. Sure you can read a lot of books on flying; but eventually you need to get in there with a certified flight instructor who can fly and let you see and do parts of things little by little.

    Well written.

      • Catherine Coy on

        Kenny Estes asked me: Did you/do you have a recourse loan?

        In CA, all conventional non-occupant loans are recourse loans. Only owner occupants enjoy non-recourse status UNLESS the purchase loan is subsequently refinanced.

        I guess my point is, if I put money down and it all went bust, I’d lose my down payment because the real estate investor’s down payment (equity) evaporates first. If I put no money down and it all went bust, I’d be on the hook for a recourse loan. Either way, I pay, but at least I got in the game because I was able to purchase with no money down (because a guru told me so and I followed his advice). Otherwise, I would not have been able to buy anything.

        I don’t see the risk as inherently worse because I had no skin in the game. Indeed, gains are magnified by the fact that none of my money is at risk. Of course, I must pay the piper if the market goes bust, but I’d be paying the piper either way (money in the deal or no money in the deal). A down payment doesn’t change the risk-reward calculation.

        I have a friend who has purchased many properties with no money down. He absolutely will not put his own money at risk. His ROI (when things go right) is much higher because he has none of his own money in the deal. His losses are the same if things go bust. It would seem to me then that the risk-reward factor favors no money down deals.

        I guess what I’m asking is, “Why is the risk factor GREATER because I have no money in the deal?” Please help me understand this.

        • Kenneth Estes

          Hey Catherine,

          Thanks much for the comments!

          Feel free to drop me a message and we can run through some scenarios. Couple of points on your last comment:

          – When unexpected expenses crop up, having a higher cash flow increases the amount of buffer before you have to start opening up your pocket book. No money down shrinks that buffer and increases your operational risk (broken furnace).
          – Most people who buy with no money down don’t have extra cash lying around for when “things go bust.” A down payment serves as a buffer for catastrophic risk.
          – Let’s say you do have some extra funds sitting around. If you play it safe and set them aside as a true reserve (meaning you don’t touch them) then you’re just unnecessarily paying the bank interest and loan fees.
          – If you don’t set those funds aside, or split the reserve across multiple investments, then you are still incurring a lot of catastrophic risk if things do go “bust.”

        • You are both right.
          The double edged sword of leverage is it magnifies your gains but also the risks on the down side.
          However as you said you will have to pay the piper if things go bust and you might end up with out a property, terrible credit and a judgment against you.
          Of course depending on how bad the crash you could have the exact same scenario only you could lose a big chunk of money you had as a down payment.

          This is one of those no clear cut right and wrong answer questions.
          It comes down to your personal situation and your strategy.

  15. Great blog. They don’t call it “sweat equity” for nothing! It should be called “blood, sweat and tears” equity. It’s good to know that I am not the only one that feels this way about these types of programs, I call them programs because I am feeling generous. There is no way to get rich quick. It takes a little bit of everything you’ve got – smarts, money, and the afore mentioned blood, sweat and tears, lots of tears!

    • Unfortunately, for many of us we need to take a few courses in the school of hard knocks before we learn. I imagine many, many investors got some amazing schooling the past 6 years – as I have – and will use this knowledge and experience (which is wisdom) in their investing for the rest of their lives.

  16. Very good article.
    Definitely agree with all the underlining themes you have.
    I do think the biggest scam that runs though pretty much every Guru type course is the “Anyone can do it!” theme.
    Yes anyone can make it in real estate, if they are willing to bust their a$$e$ to get educated and find really awesome deals. There is no push button system that will make you rich and you aren’t going to walk out of the lecture and start tripping over sellers giving you their homes at 50 cents on the dollar. Once people realize they need to put in some effort most give up on the idea and move on to the next get rich quick scheme they can find.

    In defense of the Gurus I’d say that most of the people that actually put in the work actually will have some level of success. Most of this stuffs value will be directly proportional to how much you actually use the information.
    I have a few Guru courses that I have gotten useful info from and helped give me the kick in the butt to do something. I also have a few $997 paper weights…
    However I do actually think that IF I implemented the information I would get some real value out of them. They just happened to be purchased while I was still developing my strategy and those techniques are not part of what I am focused on at this time.
    That’s my fault not theirs.

  17. Switching gears a little I’m curious about what Gurus you got these examples from?

    First off most of the guys I’d call Gurus are promoting wholesale, rehabbing or something like lease options where you can be seduced with getting rich quick.
    These examples seem like the SFH and small Multi family rental crowd. Not that there isn’t bad info out there on this stuff, just not level of Guru-dom from what I see, but I digress.

    I have never seen a Guru suggest doing 100% financing like you are saying. Sometimes they talk about getting other private investors but usually it is owner financing.
    The Guru trap is that it isn’t all that easy to find someone with a move in ready property they own free and clear that they will sell you under market and carry it all back on a note with decent terms.
    Now I will say that scenario is probably a bit more likely than getting 100% financing on your first rental property purchase from a couple banks like you suggested. 🙂

    Next what Guru says you should manage your own properties? I have NEVER seen this. Every book, article, “special report” or whatever from any self proclaimed or actually recognized expert always say to hire property managers on your first property.
    Many, maybe most, first time rental property owners will manage them themselves in defiance of this advice. One can argue if the cost savings is worth the time or if it is good to do it for a little while at least to know how to “Manage the manager” but I just have never seen that as the advice to handle that.

    • Kenneth Estes

      Thanks for the question and the thoughts Shaun. In the next couple of weeks, I’ll be adding a section to my personal blog looking at some of the most popular real estate books/programmes and detailing which aspects are “guru logic” and which are useful as real estate investing advice.

  18. Catherine Coy on

    Josh wrote: I do think the biggest scam that runs though pretty much every Guru type course is the “Anyone can do it!” theme.

    But anyone CAN do it. Unless one is intellectually challenged, anyone who wants to be a real estate investor can, in fact, be a real estate investor. Will everyone who wants to be a real estate investor have vast sums of money to start with so they have invincible reserves and a greatly decreased possibility they will fail? No, but that doesn’t mean the opportunity isn’t there for just about anyone you can name. That’s one of the unique features of real estate, isn’t it? Yes, there’s a “school of hard knocks,” but that’s true of just about any endeavor except a paper route–yet I suspect hard knocks await even adolescent boys.

    13 Reasons You’re Not as Successful as You Should Be (real estate gurus isn’t one of them):

    Perhaps the solution is, don’t pay retail for guru products. My goodness, Craigslist is overflowing with guru products offered for pennies on the dollar by people who just wouldn’t do the work required to be successful. There are also public libraries where you can get guru products for free.

    • Read the next few lines of my comment which is basically what you are saying.
      Most anyone that is willing to put in the time and effort will have some level of success in real estate.
      The Guru misrepresentation is they all make it seem like as long as you buy their course then you will be allset to sick back and wait for the checks to roll in.

      In my opinion if you actually do everything they tell you to do you will be off to a pretty good start. Unfortunately most people buy the course, some read it, and most put it aside once they realize they need to actually do stuff.

      You are right people don’t fail because of Gurus, they will fail to succeed in an investing strategy because of many of those things in that infographic.

  19. Catherine Coy on

    Shaun wrote: The Guru misrepresentation is they all make it seem like as long as you buy their course then you will be all set to sit back and wait for the checks to roll in.

    I think that attitude is a vestige of the past–Carlton Sheets days. These days, the gurus make fun of people who attend their workshops repeatedly and still aren’t investors. I’ve heard them emphasize over and over…”You must do the work!” I think they’ve been sued enough that they no longer make it look like successful real estate investing is like falling off a log.

    I still think most folks should buy guru materials in the aftermarket (Craigslist, eBay), where they’re as ubiquitous as exercise equipment. 😉

  20. Kenny – welcome to BP man!

    I must disagree with most aspects of your assessment, though your point of view will indeed be popular on BP. However, my experience has been completely the opposite. I started small; I grew bigger; on my own; without a high-paying job. I am first-generation – I have a brain, but most importantly, I have a reason to be successful and a reason not to fail… This reason holds the power to all of our successes. And the lack of it, is why we fail Kenny.

    BTW – a friend of mine who owns 650+ units keeps telling me that I should pick up the hammer – I’d save so much money…Not my speed.

    Thanks for your thoughts.

  21. HI Kenny,
    Thanks for the article. I am trying to understand the 2%rule and I just don’t get it. I use the same numbers that you did and fined tuned them to my location. the property was 185K, the rent was 1000/month after all expenses total income was 641/month that is a 0.3% ROI and doesn’t match the rule of 2%. More on this matter would really help out. Thanks in advance.

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