The 10 Great LIES Told to Newbies

General Real Estate Investing
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The 10 Great LIES Told to Newbies

Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes

10 Great Lies Sold to Newbies

  1. You can make money “wholesaling” with no capital, experience, or knowledge

  2. Your brand new business entity can qualify for credit even if you personally can’t qualify

  3. When you identify a great deal money will follow and you can own it all with no investment capital on your part

  4. If you own 100 “doors” you’ll never have to work again

  5. Owning residential multi family property is a “passive” investment

  6. Hard money lenders will lend you the gap between an institutional loan and the purchase price

  7. And per 6 above, transactional lenders will lend you the earnest money

  8. You can successfully wholesale MLS listings

  9. 90% of the wealthy made their money in real estate (it’s actually 7% and declining!)

  10. If I can do it, anyone can do it (numerous gurus and other snake oil salesman)

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Ryan BrownPro Member
Real Estate Agent · Louisville, KY · Member since 2022 · 54 posts · 11 votes
10h

@Don Konipol, great list. I'd add #11: "The rent will pay for everything."

On paper, the tenant pays the mortgage, the taxes and the insurance, and you collect the difference every month. In real life, the water heater goes out in month three, the tenant who looked great on the application stops paying in month seven, and the unit sits empty for six weeks while you paint and clean between tenants. Newbies see a $300 a month cash flow number on a spreadsheet and think it's guaranteed income. Then one bad month wipes out a year of it.

Rentals are one of the best long-term wealth builders out there, but in the short term they can get expensive, and the pro forma never shows the bad months. The investors who last are the ones who buy with reserves, budget for repairs and vacancy before they need to, and don't count the cash flow as theirs until it's actually in the bank.

A close runner-up for #12 is "The cheapest house in the cheapest neighborhood has the best cash flow." Ask anyone who bought one how that worked out.

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  • Richard F.
    Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes
    1d

    ...and MY personal favorite: Section 8 is guaranteed rent!

    1Reply
    • James Wise
      Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
      15h

      It is tho. Where is the lie on that one?

      0Reply
    • Richard F.
      Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes
      12h

      Tenant does not pay their portion, for months. Your option is file an eviction, or complain to Housing who then is likely to remove them from program, leaving you to still file an eviction to remove them on your dime.

      Any major issue (crime, violence, unauthorized additional residents) reported to Housing typically ends the S8 portion of rent and contract as well, and S8 to my knowledge never removes the tenants...it is up to the LL to file the eviction. Since most LL's assume the S8 "screening" is sufficient (it is not), there is little hope of ever collecting unpaid rent, much less any legal expenses incurred.

      S8 determines responsibility for defects at annual renewals. Sometimes they appropriately assign that to Tenant, other times wrongfully to LL, and they stop all rent payment until cured. Sometimes they "catch up" after re-inspection and passing with a temporary hold, sometimes they do not and it is lost rent. This does vary by locale, individual inspectors, and the actual defect originally noted, which is why it is critical to have you/your rep and the original move in condition documentation AT that annual inspection to challenge the inspector in the moment.

      I had a case where a Client closed on a property that had multiple S8 tenants. We were not involved or even aware of the impending purchase. S8 was not notified timely, and paid the seller after closing. Our Client had no recourse, and S8 would not make adjustments, and the Seller refused as well. Another time, an S8 family moved with no notice after we had been paid by S8. This was paid into our normal Client Trust Account, where all Client's funds were deposited. We disbursed it with the NET rental to the Client that rightfully owned the property before learning they had vacated. S8 "clawed back" the funds indiscriminately from our Client Trust Account, effectively stealing it from other owners. Our office had to make up the short fall, which was never recovered from S8. Hence my recommendation for those that take any direct deposits from S8 (which I believe ALL are now) set up a separate account for that purpose and sweep the funds from it daily.

      1Reply
    • Henry Lazerow
      Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
      11h

      This is 100% true. Many risks people do not understand and gurus who lie to trick people into thinking sec 8 is guarenteed money.

      0Reply
    • Ed O.
      Investor · Statewide, MO · Member since 2011 · 822 posts · 427 votes
      29m

      @Richard F.

      Having cut my teeth in Section 8, I always chuckle when people think it is, even seasoned investors. When people say section 8 rent is guaranteed, it is a clear indication they have never had a section 8 rental property, or maybe had ONE and got lucky.

      0Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    1d

    If you pay me $10,000, you will be a part of t

    Our family and you will become financially free

    7e investments53 Reviews
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  • Ryan BrownPro Member
    Real Estate Agent · Louisville, KY · Member since 2022 · 54 posts · 11 votes
    10h

    @Don Konipol, great list. I'd add #11: "The rent will pay for everything."

    On paper, the tenant pays the mortgage, the taxes and the insurance, and you collect the difference every month. In real life, the water heater goes out in month three, the tenant who looked great on the application stops paying in month seven, and the unit sits empty for six weeks while you paint and clean between tenants. Newbies see a $300 a month cash flow number on a spreadsheet and think it's guaranteed income. Then one bad month wipes out a year of it.

    Rentals are one of the best long-term wealth builders out there, but in the short term they can get expensive, and the pro forma never shows the bad months. The investors who last are the ones who buy with reserves, budget for repairs and vacancy before they need to, and don't count the cash flow as theirs until it's actually in the bank.

    A close runner-up for #12 is "The cheapest house in the cheapest neighborhood has the best cash flow." Ask anyone who bought one how that worked out.

    [email protected]502-889-0122
    1Reply
  • Richard NeesePro Member
    Rental Property Investor · South Vinemont, AL · Member since 2026 · 35 posts · 8 votes
    6h

    Love the list and the honesty/humor connected to it. People believe what they want to believe. I stopped listening to Gurus selling courses a long time ago. I try to talk with those that are actually doing it. Thanks for the contribution to the community . Nice to break it up with a little tongue in cheek humor.

    0Reply
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