Beware of the Real Estate Guru Trap: What to Look for & How to Protect Yourself
Blogger Andrew MacDonald, yesterday posted an article on the BiggerPockets Blog that is an absolute MUST READ for anyone considering spending their money on a real estate guru.
The article breaks down both the typical sales flow for these gurus (how the hook you) and 4 key tips for how to avoid getting suckered trapped.
Check out the article and please leave some feedback!
The Real Estate Guru Scam - How It Works & 4 Ways to Avoid It
Hey @Joshua Dorkin that is a great article. The best thing I took from it was to test the basic info or technique the guru shows you before buying the upsell. All investor do things their own way. Just because one way works for one person doesn't necessarily mean that way will work for you.
@ Andrew MacDonald
Awesome article!!
@Andrew MacDonald
Im referring to this article about Gurus and the tricks they play https://www.biggerpockets.com/renewsblog/2011/04/0...
These gurus succeed because of the misconception that real estate is some sort of get rich quick scheme. The realty is that in order to win at real estate, you must have the know-how and the will/desire to learn and keep going even if things don't go according to plan.
Good post!
Last seminar I went to was loaded with a bunch of potent sales tactics (like I was attending an self help guru seminar). They get your emotions involved and keep conditioning you to agree with things they are saying so that when they say you need such and such product you will believe them and be more likely to buy.
They're material may be really good but it over saturates you and if you haven't first mastered the stepping stones and the basics of whatever new chapter of real estate that you're exploring, my experiences are that the additional upsell material provides little value.
I'm really weary of "gurus" who tell you all the benefits you'll get from their seminars and products.... only to tell you while your at their seminar that you need "more".
I'm new to this blog and just starting my journey researching real estate investing. I attended a seminar yesterday for Hilary Farr's Rules of Renovation. Anyone familiar with this program? After some reading it seems many people are against guru week end seminars. I guess the two things they covered that caught my attention were how to find the properties and access to private funding.
I have been part of PHILL & SHENOAH GROVE's Big Dog program for quite a time now, well over two years, and I have to say that I am REALLY disappointed with the program. The program is fundamentally based on making money out of subject to deals and wrap arounds that are about to become illegal in Texas.
I would not recommend it to anybody. Phil Grove and Shenoah Grove have a business model based on education, not really on real estate investing, and they are simply interested in the big $$ that people pay to join their programs; and that is all they do, and this is how their system is organized. They just only care for the people that have paid for the highest program, their "Apprentice" program. The rest of the members that paid other cheaper programs are not really given visibility in the group or invited to events that really bring value to their education. But even going through this program will not guarantee you much, as I have known MANY people paying for this program and not really doing ANY real estate deals their first year or more, and latter, they just struggle to get deals. Their system is extremely discriminatory to the cheaper programs, systematically excluding those members from the real quality education, while the premium program is essentially ineffective.
The program is extremely mediocre, to say the least. The initial training is a 12 week program where each new investor will be told to set up an infrastructure of a legal entity, business cards, phone numbers, web pages and miscellanea, to pretend to be a real estate investor, because all this, will not really make anybody a real estate investor. There will be homework, lots of yellow letters sent, and different weekly follow up calls from someone in Phil's team. The reality is that most people do not learn anything from this training nor will ever bring it to practical implementation. The quality of their education on real estate is not better than what you could learn from a few good books from Amazon, and at a fraction of the cost. Basically, in my opinion a total waste of time and money.
The quality of their marketing is well below poor, based on sending hundreds of yellow letters to essentially the pre foreclosure lists, hoping to get lucky with the deal of your life. No other advanced marketing strategies are really taught through this program. They create the false idea that mailing the pre foreclosure lists will get you tens of deals and that deals are easy to get. The also encourage people to do door knocking on the pre foreclosure list, and the use of bird dogs to do it.
That is in summary their core marketing education, although Brent Mott, from their team, offers additional marketing education during some weekend every month, which provides some good quality education.
Their educational program also includes scheduled support calls with Shenoah and other people in the group, several days a week. Cases are discusses, under questions and answer sessions, which in general are good, but no better than reading a few good books about advanced real estate investing. Many of their questions are of legal nature, and probably a good title company could answer them for you.
After the initial three or four weeks of training, the only thing that people really know is how to send yellow letters, the 70% minus repairs rule and little else. No motivation, no action taking, no nothing else. Most of the people does not know how to run good comps, they do not have a clue about estimating repairs, they do not know any contractors, and over 95% are totally unable to find a good deal. The program is essentially a failure.
When Phil presents his Big Weekend Events it seems that results are typical and easy to get, although the CLEARLY makes a disclaimer, as advised by his attorney, that this is not the case and that RESULTS ARE NOT TYPICAL. People are ignorant enough to disregard this and they register in a program that does not guarantee any of the results that he promises and brags about, although he is really good at making it sound like if people are going to make hundred of thousands of dollars just after going through his program. He will try to justify that joining his program will be your best option, unless you have an unlimited amount of money and time to spend doing the research and learning real estate investing on your own, but the reality is that it does not take much time nor money to learn what he teaches, and even more; it will basically take a dozen of some of the best real estate investing books on Amazon and the time to go through them, subscribing to good sites as this one, and joining a couple of good REIAs in your area, without having to pay for such expensive and useless mentoring. That is all it takes ... plus a lot of motivation and action taking, as any true real estate investor knows.
They meet twice a month in Houston, first Thursday and third Tuesday of every month, and they have two rooms, one for the "general public", which is basically a hook to get people interested to sign up for the "Big Event", and the second room for the Bid Dog mastermind.
The percentage of people having actual deals among Big Dogs, is, in the best case, under 5%, probably 2% or less, and that could be considered their real success rate. During the "Mastermind", deals and strategies are discussed, but 90% of the time is allocated about doing "preforeclosures". In their group it seems that life does not exist beyond preforeclosures. It is really tiring and depressing to spend almost 2 hours just talking about pre foreclosures. There are no real wholesalers in the group, and very few people doing free and clear transactions, at least that I know of, and the average level of the knowledge about real estate of any of those "Bid Dogs" attending the masterminds is very low, or almost non existent, as most of them are new members.
Phil preaches that they are experts because the know just a little be more about real estate investment than the average guy, but the reality is that is all smoke and mirrors, and they feed and prey upon people expectations to improve their lives, creating false expectations about people being able to make money the easy way, with no credit or money to start with. The reality is that if you speak to many Bid Dogs that have been in the program for over a year, most of them do not have done much or no actual deals at all, and they are very disappointed with the program.
Phil and Shenoah are surrounded by a group of assistants which, in my opinion, are just plain liars and fakes, pretending to be seasoned real estate investors, which is really questionable, and talking about incredible and fantastic deals that they are doing, in my opinion, most really in fantasy land. Brent Mott is probably the only accesible and genuine person in their team, he will listen to you and will not turn around and leave you hanging in the middle of a conversation like most of the others do.
Among the useful people that work around the Groves there is Alan T Ceshker, their recommended attorney, which is very knowledgeable and a really good asset to know. He is not the cheapest, but he is probably one on the best attorneys for real estate investors in Texas.
Kimberlee Lado is also an extraordinarily helpful person, and will help providing good information about resources within the group to the members, but she mostly does all the back office work for the Groves. Like all efficient people, she has a very helpful and good disposition, but do not forget that she will not work for you, but for the Groves.
Phil rarely socializes with anybody at those events, and he is the kind of guy who will not look at you straight in the eye (not surprising, since he must be aware that his program has probably a 95% failure rate) and if you have not paid the full apprentice program, we will not even take 5 minutes of his time to talk to you. He either has very poor social skills or he just doesn't give a dime about people once they paid.
If you have paid the "Apprentice" program you will be eventually invited to spend some time with Phil some weekends, and play poker, smoke cigars and stuff like that, if you are into that, and some "private" events of the kind. If you have not paid the "Apprentice" program you will just be another sucker that paid at least $20K to finance the Groves lavish lifestyle, and you will get very little back from it.
I have been attending many of their meetings, and over the course of the months and years I have seen very mediocre people with very little experience or skills in real estate to be presented as real estate investors, many of them people that have barely made any money on their deals, and that have done very few deals. Once again, all smoke and mirrors.
I am amazed that people such as Nancy Gonzalez, Hector Suarez, Belkis Guifarro, Terry Knight or some others are anything but close to a seasoned real estate investor, could be teaching real estate investing seriously.
The meetings are also a sales pitch for all kind of vendors, specially people from Quest Ira, among others.
Within the Bid Dog group there is also people trying to sell memberships to marketing coops, such as Erick Rodriguez, Hector Suarez or Erick Beltran. In my honest opinion, the farther away you stay from those people the better, as they have very little to offer as real estate expert.
I have to admit that Shenoah is the only really knowledgeable person there, and that she really does her best in the mastermind sessions, adding a lot of value and answering many questions. She is the only real estate investor there, but you have to take into consideration that she is fully aware of the low success rate of their program and that she is there to keep the engine going for their educational business, which is the real nature of their business, making money on the program.
Finally, the really few seasoned real estate investor in the Bid Dog group are there mostly to get financing and money from the new investors and partner up with them, using their money to their benefit, and with very little interest in really teaching or mentoring anybody on and selfless manner. People like Nam, and some of the old timers there are actually good at doing deals, but not to help anybody new to learn from them. The "old dogs" there keep their mouths shut unless it is to ask for money.
My advice is to run from that program, and invest that money is online education, on well known resources such as the Kent Clothier reww system, this Biggerpockets forum, the cheap and inexpensive marketing programs from John Cochran, Chris Prefontaine or many others that will help you to get started without having to spend tens of thousands of dollars on mentoring of people as little genuine as the Groves.
In summary, Phil Grove's program will not work for 95% of the people that enroll on it, and out of the other 5%, it will mostly help those that end up in Phil's team. A very rare 1%-2% will be really successful and you will not see them much in the meetings after a while, as they are to busy to go back to "school", and probably the masterminds will not be teaching them anything new or adding any value. It is incredible that so far nobody has actually initiated a class action lawsuit on the Groves yet.
You all need to take into consideration that the Groves business model is structured teaching real estate strategies fundamentally based not he subject to and wrap models. If the bill is passed, their model will simply collapse, and the false expectations created by teaching how to became rich doing real estate transactions with no money or credit will have to be reconsidered.
That is the great catch of their event, that anybody, with none of their money, no credit and no experience can simply talk some going to foreclosure into transferring the property to them, with the expectation that they will attend the payments.
All experienced investors know about the horror stories that exist around the subject to and wraps, people not making payments, unscrupulous investors asking for money for the reinstatement and keeping it, etc., It is true that maybe is only 1%-2% of the occasions, but it causes enough damage to need proper regulation.
The Groves have created a big business on real estate education with a very efficient assembly line that keeps continuously dumping unexperienced investors to the marketplace that focus, pretty much exclusively on subject to deals. Their meetings are mostly dedicated to subject to examples and cases, as well as their masterminds.
If the bill is passed, the Groves will be in a very delicate position if they want to continue teaching the way the do, and, therefore, they have ALL THE INTEREST IN THE WORLD to oppose the bill. That is why they have been opposing the regulation with all their might and they attended yesterday the Capitol public hearing for the bill. I would be doing the same if I were them. It is just that I am not like them at all, and I consider that the protection of people and consumer comes before the interest of a handful of inexperienced investors, that they do not even make a proper living out of it.
Originally posted by @Alan Grobmeier:
@Tracy Springfield I am a buy and hold investor with a very specific goal. I am wanting assistance in getting properties that meet my 'pain in the A$$' business model. The 'kicker' is that I am wanting to acquire via subject to or owner financing. I have too many
For those of you reading this: You are PROBABLY better off doing a deal vs paying someone thousands of dollars for 'education'. If you need education, you should go to a Barnes and Noble and look for real estate books vs. handing thousands over to a guru. $50 vs $1000+
Nice post. I'm a 'learn by doing' guy. So I bought a few single family homes. Realized the cash flow paid all costs + made me an income. Then I decided that the income:price ratio on multifamily was better so bought an 8 unit. Later a 16 unit. Later a bank owned 32+25 unit. Sold the 32 unit (which I now have under contract to buy back 5 years later), used the cash to buy a bunch more. Sold some of them, bought more. Rinse / wash / repeat.
No one is going to teach you more than just jumping in and doing it.
Originally posted by @MIKE HOUSTON:I have been part of PHILL & SHENOAH GROVE's Big Dog program for quite a time now, well over two years, and I have to say that I am REALLY disappointed with the program. The program is fundamentally based on making money out of subject to deals and wrap arounds that are about to become illegal in Texas.
Can you explain more about wraps being illegal in Texas soon? That's one of the ways I was able to claw and scratch and hustle into my first properties. I'd try to seller finance the owners equity and wrap their loan. I've done it a bunch in my starting days. It worked well and helped me grow when I was a pennyless n00b (no offense to anyone in that spot now, we've all been there. And I feel sorry for someone that skipped any struggle).
Hi Cody,
"Illegal" unless it is made with the prior, written consent of all existing lienholders and is closed at a title company's office:
SB 1994 (Zaffirini) provides that a wrap loan is void and unenforceable unless it is made with the prior, written consent of all existing lienholders and is closed at a title company's office. This provision is intended to eliminate wrap lenders’ incentive to hide transactions from the original lienholder, who may have a due on sale clause. SB 1994 also creates a fiduciary obligation and constructive trust for all payments a new owner makes to a wrap lender, ensuring these payments are used for their intended purpose. Finally, SB 1994 gives a homeowner several remedies if a wrap lender violates the law, including the remedies in the Texas Deceptive Trade Practices Act.
From the Texas Senate:
"
| Senate Research Center | S.B. 1994 |
| 85R6359 CLG-F | By: Zaffirini et al. |
| Business & Commerce | |
| 4/11/2017 | |
| As Filed |
AUTHOR'S / SPONSOR'S STATEMENT OF INTENT
Recent years have seen a spike in the prevalence of a particularly insidious category of mortgage fraud involving so-called "wrap" financing, in which a seller finances the sale of a residential property that already is subject to an outstanding lien, often without notifying the buyer of the senior lien, or the existing lienholder of the sale. If a seller fails to pay the senior mortgagee, the mortgagee can foreclose on the property, and the buyer will be ousted without ever having missed a payment to the wrap seller. Worse, if the seller never recorded the conveyance, it can be difficult to establish that the buyer has any interest in the property.
Such activities may already subject the seller to administrative penalties, civil liability, or criminal punishment, but significant obstacles under current law impede both the successful prosecution of bad actors and the recovery of civil damages on behalf of a victim. For example, licensing and registration requirements are ambiguous, making it difficult for regulators to intervene. Prosecution for fraud requires establishing intent beyond a reasonable doubt, which may cause some prosecutors to treat these as mere breach-of-contract cases. Finally, if the seller becomes insolvent, the buyer may not be able to recover damages, because the bank will have a prior interest in the real property, while the buyer will be in the position of an unsecured creditor vis-�-vis the insolvent seller.
S.B. 1994 addresses a number of these issues. For example, the bill would ensure that persons engaged in the type of wrap transaction most susceptible to abuse would have to register with the Texas Department of Savings and Mortgage Lending�there would be no "de minimis" exception as there is for other types of seller-financed transactions. What's more, the bill would provide that wrap payments are held in trust by the seller for the benefit of the buyer. This would ease prosecution of bad actors, as conversion of trust assets would itself be a crime, regardless of any larger intent to defraud. This also could ease recovery of damages, as the buyer would be entitled to recover the proceeds of converted trust assets. Finally, S.B. 1994 voids the lien of a wrap sale that was not closed in a title office and to which the senior mortgagee did not give written consent"
Sorry but F that guy. I wanted to throw up when I saw "insidious category of mortgage fraud", and didn't read the rest.
It's not fraud at all. And lenders have the "due on sale" clause to protect themselves (though I've never had ONE lender use it).
This is 100% being done to force people into the traditional financing system which is based on tax return income only (by law) thus pressuring people to skip legal write offs they might have to boost their tax return income so they can qualify for loans the "right way" ('right way' being the way the government wants you to)
This guy is a disgusting bought and paid for shill. It's always done in the name of "consumer protection" when nothing could be further from the truth. Without wraps, there is NO WAY I could have gotten started in this business. I went from 0 to 1000 doors in 10 years because I was able to do things like wraps in the beginning.
Edit: Yeah, after reading I was right. This is framed as 'buyer protection'. When you do a wrap, or any transaction, USE A TITLE COMPANY. If you don't, you're being foolish. On my wraps, *I* paid the mortgage company directly (if the wrap included any extra to the seller, that went to them directly). I had access to the online account for the mortgage so I could see all notices, etc. But by saying "no wraps without the lien holders written consent" you're basically saying "no wraps" because written consent will never happen.
Hello all, thanks for all the great posts. I am new to investing and did purchase the training course. years ago I got the Carlton Sheets discs and fell off the wagon. I didn't realize that I was the type of learner that needed a set outline and guidelines for what to do. I have learned so much from this course as well as all of the other blogs, articles, etc. I hope it all pans out, I will work hard to earn all I can, listen to both sides, pros and cons and just take away more knowledge and apply it! Best wishes to all! Helen
Good feedback from many. Even with 20+ years in real estate investing, I find great value in education. You can even learn a lot just from the "pitch". The guru will tell you what to look out for, then offer the solution. Finding out what others see as pitfalls is very useful.
I go to classes all the time, I participate in several REIA's (the Mrs. says stay home some nights). I'm kind of brutal with new folks these days. Bluntly asking what they are bringing to the table, how much relative experience, capital, goals. Some come back for more because it's clear I'm capable and direct.
Pick a direction. Try it. Learn, Pivot. Try again.
Hello everyone, I am embarrassed to even have to admit that I completely fell for the guru investor education and mentoring and am looking for some help with getting a refund.
I made the mistake of doing research after making my purchase and fighting with the company for them to provide the "so called mentoring" I purchased for 20 days which was outside the timeframe to get a refund.
The company is Response Real Estate Education and we are looking for a real estate expert who could write a second opinion letter to substantiate that they did not provide the education/product they sold and help with our credit card dispute.
My credit card company has requested "a second opinion on company letterhead from another merchant or bonifide expert that states how the service was defective or did not match the description of your sales invoice."
Ultimately the real estate success education package we purchased literally teaches illegal trade practices in the state of Oregon, thus it is useless.
Thanks for your consideration and thanks for writing this article!
Dani
wish i had found this website before i paid 200 for a 3 day seminar. the seminar had info you could find here on BP or any other real estate book. at the end, they were selling a 50k program. I was very close to buying in until i found BP. i'm so glad i didn't go that route. I'm leaning more from the BP podcast here than i did at that 3 day seminar.
I am glad this site is here. I already joined and paid for an organization, hope it works out.
@MIKE HOUSTON right...
https://www.biggerpockets.com/forums/79/topics/426...
for anyone listening to this guys response there seems to be a theme of Mike Houston trying out all the programs!
What are your thoughts on Tai Lopez, Graham Stephan, John Crestani and Tanner J Fox? Are they all using the same system? Selling their courses with utilization of investment and real estate through online marketing?
@Joshua Dorkin Great article, I have many friends chasing the dream and image of becoming an entrepreneur, but when I goto these seminars they always pull on your emotions, paint you a life that you can live, from the knowledge provided in the program they are offering! I still don’t understand why they fall into this trap!
@Joshua Dorkin yes there is a lot of new “investors” who never bought a deal themselves and “educating” others on “how to do it” although there’s are people like Joe Fairless and the rest who have the track record and are able to do it.
Originally posted by @Monica Breckenridge:Yeah, don't get suckered into their products. These people are really good speakers and are very motivating. Also whey they say they are going to mentor you, don't believe them. They usually have a student or employee who does that part. They aren't available by email or phone. Big Waste. I found my mentor who was actually doing deals and we became friends. Do your research first and find out what others have to say first.
Whatis yyour opinion about paying someone who can help who call himself a consultant?
The biggest piece of advice is to NOT buy any notes or anything from guru's. Complete conflict of interest. Too many people have been ripped off by people like Scott Carson, who trolls REI groups for victims to pay for his expensive "mentoring" and then sells them total garbage. There are dozens & dozens more.