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The Not So "Lucky" Wanna-Be Tycoon

Richard Warren
3 min read

Last week I wrote an article about “Lucky”, the wanna-be real estate tycoon (article). The article was meant to be a tongue-in-cheek story, yet many people took it seriously. The fictional character “Lucky” was a composite of many people that I have met over the years. He was portrayed as someone who wanted to get rich quick, yet was too lazy to work for it. He kept looking for short cuts and was certain that getting rich in real estate was easy if only he could get someone to reveal the secret formula.

There are many companies out there that prey on these people. They offer a free seminar that is nothing more than a sales pitch. They look to sell books, tapes, sales courses, boot camps and mentoring programs. They hold themselves out to be experts in the field of real estate investing. What they really are is experts in marketing. When someone buys a program the company is generally looking to upsell them, or get them to buy additional programs.

While there are a lot of trainers who have something valuable to offer, many of these “gurus” have little or no investment experience. The company may target those who are looking for easy money, but regular people get caught as well. People who are legitimately trying to learn something can easily get burned. My character, Lucky, was shown as someone who couldn’t make it as an investor yet claimed to be an expert who could teach others.

The Not So “Lucky” Ones

Like many works of fiction, the story of Lucky does have a factual basis. I know of a couple who got burned by a “Lucky” type guru. They were hard working people who wanted to invest for their future. They had done well on their own home and wanted to try their hand at investing in real estate. The market was flying but they didn’t know where to begin. They wound up going to a “free” seminar where they ended up enrolling in a boot camp program. While they did learn a lot, they were still uncertain. At the boot camp they were convinced to sign up for the mentoring program. It was a lot of money but they were assured that they could make it back on one deal.

This couple was looking to invest in the Las Vegas real estate market when it was very close to the peak. Their so-called mentor coached them through the purchase of a house at a price that wasn’t any better than what they could have done on their own. The idea was to use the property as a rental while they waited for the inevitable appreciation. The rent didn’t come close to paying the mortgage let alone the other costs involved. They were almost $500 in the red every month. They were told not to worry because they would make all of this back and more.

The Sad End

Unfortunately the ending to this story is all too common. The real estate market collapsed and the house foreclosurepn1dropped to a price that was significantly less than the mortgage balance. They couldn’t keep up with the payments and let the property go into foreclosure. They lost the almost $20,000 for the training and mentoring program as well as the down payment on the house and two years of negative cash flow. The total loss was almost $100,000. To make it worse, a lot of the money had come from a home equity loan on their personal residence.

It turned out that they had no legal recourse because there was no fraud involved. They just followed bad advice from someone that was supposed to be an expert. They were not looking to get rich quick, they just wanted a better life. They were well aware that they didn’t have the proper knowledge and tried to acquire it. Unfortunately they just trusted the wrong person.

Do Your Homework

Before engaging the services of a mentor or enrolling in some course or boot camp, do your homework. Has the person you are looking to learn from actually been a successful investor? Have you checked references before turning over your hard-earned cash? Ask the hard questions and verify the answers. Be careful because “Lucky” is out there.

Trust, but verify. – Ronald Reagan

 

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.