There are two things I hate in this world.
- Stupid people
- Those who prey on Stupid people
I'm 26 with ~40k in student loans and CC debt, just starting to manage to chip away it. It's awful, having that weight. I feel like i have no freedom; with that $500 due every month, I can't afford to be without income for a second. I live alone, but have no independence; I'd like to have the freedom to move to another town, or another state; to switch careers if I get bored.Oh the dilemma. Part of me just wants to give that person a hug and shake my finger at those naughty companies for offering you money so freely. A small part of me doesn't think you should be allowed to get more than $10k in student loans unless you are studying engineering, medicine, law or software development. Recent history proves that many people have a poor understanding of time and money, and need to be protected from those who would lend to them.
The other half of me fumes at this fool. You borrowed a lot of money from other people, and now you are sad that you have to pay it back? Seriously? You wish you could just move where ever you like? That's for hobos, not intelligent people. You chose to borrow money to aim for a better quality of life, and that money is already spent. Sometimes I wish I didn't have to pay the mortgage on my investment property (usually during the gap between tenants), but I accept that I do because it's called responsibility.
Note: This is a real estate blog and I very easily could have gone the route of yelling at people buying too much house with nothing down who are in danger of losing it. It would have been easy because it's hard to have sympathy for a person making $30,000 a year trying to own a $500,000 home. But I ranted against foolish student loans, a more controversial subject. I really have no patience for people who cry to society because they got what they wanted but "didn't know it'd be so hard to pay it back".
Still, even though many of these stories pull me all over, I still hate real estate gurus with an unbridled passion. While surfing the web today I came across some photos from a "real estate education seminar", courtesy of Casey Serin, that kid who failed in real estate investing to the tune of $2.2 million. Let's look at the wonderful education you would receive if you had paid $15,000 to attend one of these workshops (this one I believe was The Learning Annex):
This is a "sample script" that you should use as a template when discussing a property with the seller's Realtor. Since it can be hard to read, here's the transcript:
(Listing agent on phone now) Hi, my name is Larry Goins and I'm an investor and I saw your listing at _____ address. Could you tell me a little about it? (Ask the following questions in a conversational manner) #br, #ba, Sq. Ft, age, vacant? Bank owned? How much work does it need? $amount of work? How much would it rent for? How's the market there? Would this be a good rental or a better retail house? What would it appraise for after repairs? Could you sell it for that once I fix it up? How long would it be on the market? Have you had any offers on this house? How long has it been on the market? I know you work for the seller, but I also know you want to get this house sold. What do you think it would take to buy this house
I'll let you read through that and draw your own conclusions. Aside from the fact that asking an agent questions like "How's the market there?" is patently ridiculous (do you think you're going to hear "not so good right now"), and that you should have a much better idea of rent tenancies in any areas you intend to invest than a selling agent would, I wanted to bring up the last question which trailed off at the end.
The realtor's job is to represent the seller's best interests. that means that if they place it at an asking price of $300,000, that's because the Realtor and the owners decided that was the best possible price to attract offers. If an agent tells you over the phone "oh, they want $300,000 but I could probably talk them into accepting an offer of $270,000", that agent has just broken every code of ethics even remotely involving real estate. I try to get the best offers I can when buying, but I won't stoop to encouraging the corruption of others.
Look at the by-line of this one. The entire focus is on the $249,000 net profit! But this raises a ton of questions.
-First of all the slide says that the house was worth $1,200,000 but it was sold for only $850,000 in auction? So your "investor" knowingly took a $350,000 loss? Basically this slide shows that selling at a public auction is a great way to lose money.
-Of course, I'm not sure where that $1.2 million number comes from, because if you look closely at the photo you can see that the flyer advertised the house as being appraised at $973,000.
-Assuming the house is really worth $850,000, what idiot in their right mind would sell their equity of $230,000 for a mere $24,000? The worst possible idea that I can think of would be the owner no longer being able to afford payments and afraid of losing the house. If that's the case, get a HEL to cover payments and put the house on the market immediately!
Take special note of the $100 deposit. It'll come back in just a second.
Note that this guru is talking about buying foreclosures with "Only $100 at Risk"! What a deal, right? As I wrote earlier, just because you only put $100 down doesn't mean that you are only on the hook for $100. It's called leverage for a reason. The only possible way to sell a house while only risking $100 is to use that $100 to purchase an option to sell.
Maybe that takes a little explaining. Let's pretend that I have $100 to invest and I think that Microsoft is going to explode in the next 12 months. I can use my $100 to buy 3 shares of MSFT ($28.91) right now and wait, but with only 3 shares I might not get a lot of return.
Alternatively I can purchase an "option". That's when I say to my broker "I'll give you $100 right now, and in return you'll promise that 12 months from now you will sell me 8 shares of Microsoft for $28.91 if I want to buy them". 12 months later, if the stock has climbed to $35 I can exercise my option and net a $6.09 profit on each share (you don't have to have enough money to actually buy the stock at that time, you can just collect the money). But if the stock falls to $20 a share, you can just chose to let the option expire and you won't lose any more money.
So why is this guy's idea to get foreclosures for $100 ridiculous? Because no one will ever sell you a sell-option on a home for that little money. the strategy he is probably pimping requires a $100 down payment and a hell of a lot more money borrowed (which will have to be paid back).
So far do you think the advice might be worth $15,000?
If not, then you should spend even more money on worthless products! And guess what? Not only does this fantastic package come with a 3 Ring Binder! but it also even installs bookmarks on your computer for you! You won't find a deal like that except in spy-ware!
Finally some real information! Marketing can be a valuable part of real estate information, and while I find direct mail to be a bit crass it obviously works for everyone from political candidates to credit card companies. Of course the information on this slide is relatively worthless. Knowing that the color of the envelope makes a difference is relatively worthless unless you know which colors lead to higher success rates.
For a good example, check out this graphic from Google illustrating effective adsense placements.
This not only shows you that the placement of ads makes a huge difference in how many users actually click them, but it also shows you the relative click rates, which areas generate the most traffic.
To be fair, the picture of the slide from above is just a single slide, and maybe there's a chance that the speakers then went on to explain color theory and how various colors affect the people you try to reach through your advertising. But I doubt it.
So here's my conundrum. Who am I to be mad at? The blood-sucking self-proclaimed "gurus", or the puppets that are too foolish to stay away from them? Both drive me nuts, both are a burden on society. It's tough to be me sometimes...