by Julie Broad
Last week Dave and I attended a real estate investing club meeting in Langley, BC. We went for many reasons… the biggest ones being that we like to meet like minded people, we wanted to meet the man behind the club, and we had a few questions about sandwich leases that we wanted to find answers for. Since we weren’t going to be far away from the meeting, we stopped in.
The feature presentation was from a local area mortgage broker. And he did an excellent job of explaining the important things you need to understand about mortgages as a real estate investor. It was a good refresher for us and an excellent talk for those new investors in the room. When we got to the part where we started discussing credit scores the mortgage broker mentioned a couple he just tried to find financing for that had a bad credit score because they had 16 credit cards.
He went on to explain why having so many credit cards can be very damaging to your credit and how you should keep it to five max. He also gave some other great tips like to keep your credit card limit high but always keep the amount you owe low because your credit will be negatively impacted with balances that are close to your limit. For some other tips on how to effectively manage your credit, check out this article on how to check your credit.
At this point one of the new real estate investors in the room raised her hand. She said “I just took a real estate investing course that told us to go out and get as many credit cards as possible. They said that having all that credit was a good thing.”
I actually felt Dave shudder beside me. That brought back memories of the real estate investing courses WE took early on as investors. And some of the advice that causes so much damage that it can take years to recover from (as it did with us). We knew instantly that it was one of a few get rich quick guru programs that had come through town recently … but the mortgage broker was horrified and said “Who taught you that?”
Sure enough … she confirmed that a get rich quick guru course had struck again.
And the worst part is I think that this woman didn’t actually believe the mortgage broker when he explained why this was horrible advice. She tried to argue “well you’re not necessarily going to use the cards you’re just supposed to have them in case you need cash for a quick flip.”
If it weren’t for the fact that we were trying to keep a low profile – I would have stood up and suggested that there are many things that guru taught her that were high risk and very dangerous if she decided to act upon any of them without learning the fundamentals of real estate first.
There are also things that the guru taught just because they stand to make money off your fear!!
Here’s some of the horrendous things we were taught at a get rich quick guru program and the motive behind the lesson:
- You must have a triple tiered corporation – you are stupid and foolish if you don’t have one. They actually used these words, explaining all the horrible risks and extra taxes we’d pay without one. Um… guess we’re beyond stupid because we bought a two tiered corporation and were not able to buy and finance a single property in that fancy pants $3,000 corporation the guru sold us – and for 3 years we tried!
- Call your credit card company and demand a lower interest rate and higher balance on your credit card. Conveniently they get us to do this during your lunch break in the course. We did as we were told – and by gosh – we were successful. It’s a good thing too because thanks to that call we had $20,000 of available credit on our card that we could use to finance the big mentorship package they convinced us to buy at the end of the weekend. And, they reassured us, with one deal we’d pay it off so why not?! By the way, it actually took us over a year to pay it off and then 2 more years to fix all the problems we created for ourselves by buying several troublesome high leverage properties.
- Wholesaling, assignments and sandwich leases are going to make you tons of juicy and gigantic cheques within weeks of learning the techniques. These were hot topics at the course we took because the cash looks so much juicier than a ‘boring old buy and hold’ that takes years to get super rich from. And yes, one good assignment or wholesaling deal CAN give you a nice juicy cheque but guess what, you aren’t going to find that deal a week or two after the course because there are still a lot of things you have to learn to do that first deal. But luckily before you leave the program they help you to realize that there are many more details you need to know before you can do those deals – AND they offer just the solution – specific courses on each subject for $3,000-$4,000 so you can go out and learn more.
Listen – we fell for everyone of those things so don’t feel bad if you did too. These folks are master marketers. If there is one thing the get rich quick gurus do know how to do it’s sell! And we were determined to be successful as real estate investors so we believed what they said and dove head first into everything they had to offer.
It’s a good thing we were determined or we never would have picked ourselves up and gone on to succeed after the early mistakes.
But now when I meet people who actually DO all these risky “techniques” that the latest guru has taught them I want to shake them to their senses and save them from the years of stories and pain we experienced.
People – you have to educate yourself in order to be successful as a real estate investor. And good quality real estate investing courses ARE a fantastic way to meet like minded people, get solid advice, and learn what you need to learn to move forward.
But look for the people who are genuinely trying to help. Look for someone that presents a realistic side to the story. I look for teachers who are upfront about risks, the time and the effort you have to invest. I also look for people who are teaching fundamental principles as well as their particular spin on investing. And most importantly, I want to know whatever else they are selling in advance, so if they are telling me I should invest in Florida I know whether they are saying that because they also happen to sell investment properties in Florida or because they just like the market fundamentals. It’s ok either way but I want to understand their bias. Just like if they say I need a 3 tiered corporation I want to know whether it’s because they are going to upsell me their package for a 3 tiered corporation or whether it’s because it actually saved them from losing everything in a law suit.
As the next guru rolls into the city nearest you … I beg you to think carefully about what you NEED to learn. And if that course will give you what you need then go. But before you sign up for ANYTHING they are selling think about the bias that might be behind what they are teaching. And question what they are saying. Why in the world would anyone ever suggest you take on 15 different credit cards? Can you imagine what a mess your credit would be if you actually started to use them and something went wrong – and by the way some things will go wrong as you get rolling – so why put yourself in such a dangerous position? Just having so many credit cards does serious damage to your credit that takes time to repair without even using them. And as a real estate investor you should covet, love and care for your credit score.
And yes, I do have a real estate investing course to sell that is focused on the fundamentals, and yes I welcome you to purchase it, but no… that is not why I am ranting against guru real estate investing courses. I am ranting because I care about the moves you make as you become a real estate investor – and there are things you can do to make your life a whole lot easier as you start – and spending tons of money on guru programs isn’t one of them!