The nice thing about this industry is you actually don’t have to trust anyone! This may be true in other industries as well, I haven’t really put much thought into it, but in real estate investing there is very little that you can’t somehow verify. At least in my opinion.
We all know the gurus shouting from the rooftop about their mentoring programs, or their get rich in 30 days promises, or some are even just screaming their general opinions about who knows what. The gurus will often try to charge you a lot of money to learn what they know. I don’t think all those programs are bad by any means, and some of them may even be well worth the thousands of dollars you have pay for them. But the question always comes up, how do you know if you can trust who is pushing that expensive program? How do you know if the program will work?
Or maybe you aren’t looking for gurus, you are just looking for deals. How do you know what you’re buying? How do you know if you are getting what is promised? How do you know if you are getting a good deal, are there hidden tricks in there somewhere, or is the seller a total scammer?
I want to address two major points in relation to trust in this industry:
- Who to Take Advice From
- How to Verify Your Purchase
Download Your FREE copy of ‘How to Rent Your House!’
Renting your house is a great way to enter the world of real estate investing, but most first-timers (understandably) have a lot of questions. Fortunately, the experts at BiggerPockets have put together a complimentary guide on ‘How to Rent Your House’. All the skills, tools, and confidence you need to successfully rent your house are just a mouse-click away.
Who to Take Advice From
The trigger for this article actually came from a comment I received on a blog I wrote on here a couple weeks ago talking about the big investors in the world, and I had named Robert Kiyosaki (author of Rich Dad Poor Dad and a huge name in real estate investing, for anyone not familiar). This commenter called Kiyosaki a name or two in the comment and then referenced a website from a guy who had written out all his negative opinions about Kiyosaki and what he teaches. So essentially, at least how it appeared from his comment, he was justifying saying Kiyosaki sucks because of what this guy had said about him (Kiyosaki). Maybe that’s not how he meant it to come across, but either way the reference to this particular website made me raise an eyebrow.
Here is the reality, and I use Kiyosaki as an example. There will always be a debate about whether or not Kiyosaki is worth his salt. I am openly a huge Kiyosaki fan, I have read a large number of his books, I follow the Rich Dad blog, and if I ever see his name attached to something I already know that I am going to understand and agree with the material. I have the same mindset he does. Not everybody does, and that is totally fine, but I do.
In terms of the negative things said about Kiyosaki, of course the guy sells seminars and tapes and programs. Because he can! He is very open about wanting to do financial education, so he does exactly that. He is very smart in this field and his ideas are worth sharing. The money he charges for those programs is money for his time. He is the brain behind everything in Rich Dad Education, he deserves to get paid for it. Another question I hear about him is whether he is even legit. If you go online and search Rich Dad or Robert Kiyosaki, you will find a ton of scam accusations by random people. It’s worth it to read some of them because you will quickly realize the majority of them are from people who are clearly upset they didn’t get rich overnight after taking a Rich Dad class. I would venture to say that the majority of people who pay the money for those classes don’t end up making it.
Because they went into it thinking they were going to learn all the answers and be an overnight success. Guess what, it doesn’t work that way. Those classes are just the start of the grueling time and effort you have to put into investing. The other reason people wonder if he is legit is because he has hit the headlines as having filed bankruptcy with one of his companies and what on earth financial expert would ever let that happen! My thought on that is, just because he is considered an expert doesn’t make him perfect. Think of the mistakes you and I make in investing. For every mistake we make, say we have five successes. If he follows the same numbers, he is going to have one mistake for every five successes too, but when you are at his level, those mistakes and those successes are huuuge compared to ours! Big enough to make headlines. So even if one of his companies flunked, that doesn’t mean that he doesn’t have five more that are raking in millions with no problem. Or even simpler, filing bankruptcy can be a very smart financial strategy in some cases, so he may have just been doing something slick. We’ll never know, but either way it doesn’t matter.
Saying all that doesn’t actually get to my point, but it’s worth mentioning. Mostly so you understand there are always multiple sides to every story and you should always be leery about whose opinion you listen to about anyone.
With that said, how do you know who is legit and who isn’t if you are trying to be open-minded about everyone? This may sound strange, but I really don’t think it matters who is legit and who isn’t. Here is why. Let’s say Kiyosaki actually is a complete con artist. He has no idea what he is talking about, he overcharges for worthless programs, and he’s just a sleaze. All I know about him is that because of all the books I read of his, the one seminar I went of his (only the $595 one), and everything I read from him, I have gotten myself out of my 9-5 job, I work for myself now from wherever I want and whenever I want to, I was able to buy five properties in less than two years only using creative financing, and my entire lifestyle has changed in such cool ways most people would never even understand. All because of what I learned from him. I read plenty of other books, but I can definitely say the huge majority of everything I have accomplished, and continue to accomplish, is because of things I learned from him specifically. So if he is a total con artist, maybe he is I don’t know, who cares? Because everything I learned from him worked! It may not work for everyone, but it worked for me. I will never sternly tell anyone that Kiyosaki is right, and I never bash anyone who says he’s wrong, because I don’t care if he is right or wrong and I don’t care what people think of him because he worked for me. That’s all that matters.
So in terms of finding the right mentors in this industry, or the right gurus, or just the right people, don’t look at it in terms of who is a scammer and who isn’t, focus on what you learn from that person. Did what you learned do something positive for you as an investor? If so, then go with it! If what you learned was sketchy, or unhelpful, or hurtful, then stay away from the person. My warning is to try to test these people out by reading their books and blogs and talking to others who have followed them before dropping thousands of dollars on one of their programs. You’ll definitely feel scammed if you pay that much for bad material. Bad is relative of course, because you can literally learn something from even a bad presentation. You just have to open your ears. I’d be most concerned with someone teaching you illegal things because those would have way more repercussions than just ‘off’ advice.
Thinking of staying legal leads me to my second point about trust in this industry, which is more related to buying deals or buying into deals.
How to Verify Your Purchase
I would say the two biggest things you need to confirm when buying into any real estate investment are- confirming everything is legal, and ensuring you are getting the deal you think you are. Everything related to these two things can be verified to some degree in any real estate transaction. I mentioned these things in a past article, Due Diligence on a Turnkey Property. I mentioned in there easy things you can do to verify what you are buying, both from a legal standpoint and a quality standpoint, and I’m going to say those things again here but in general, non-turnkey terms. My disclaimer of course is to say that none of these things will 100% guarantee something bad doesn’t happen with your property, but they sure are good first steps in protecting yourself against a bad purchase or deal.
1. Confirm any contracts or written materials with a real estate attorney. It’s great to have a second pair of legal eyes on any documentation. A couple cautions though, 1. Some attorneys will go unnecessarily crazy on a document and do more harm than good, and cost you a ton of money doing it, and 2. Understand that even if you have a rock solid contract or agreement, you aren’t guaranteed to be covered if something goes downhill. Meaning enforcing contracts doesn’t always end up being cheap, easy, or effective.
2. Always use a home inspector. Doesn’t matter what you are buying. A flip, a rental, a multi, an office complex, anything. Shoot, get more than one inspection done if you want. Few things cost an investor more than unknown maintenance a buyer didn’t know about ahead of time.
3. Title insurance. If applicable. This will protect against title issues that may arise on a property later.
4. References. You can always ask for references of people who have worked with someone in the past. Get their opinions. Will buying into this deal or company likely benefit you or hurt you? Ask others’ opinions.
5. Never just nonchalantly hand money over. Make sure contracts are in place first, make sure you know where the money is going, and make sure you know how to get it back should you need to back out of the deal, or what are the contingencies for getting it back?
Remember, you never have to do something you aren’t comfortable with. There is another extreme to that where you end up paralyzed and not doing anything, and that’s not good either, but listen to your gut, don’t hand money over easily without good research, and use common sense. If it walks like a duck, it’s not always a duck.
Going back quickly to the guru idea, remember, it’s all about what you benefit from someone, not what others think about them. Use other’s opinions for reference for sure, but be your own judge. And don’t listen to anyone who says you can be rich in 30 days.
Can anyone add more precautionary measures that I left out that are helpful in protecting yourself?
I won’t be writing next week as I’ll be at an investors’ weekend in Nicaragua, but stay tuned for more when I get back!
Photo Credit: just.Luc