No Money or Credit Investing is a Crock
No Money or Credit Investing is a Crock! Why are you still teaching it?
I am going to take a time out from my article series this week. I received an email from a person who got into
real estate investing a couple of years ago practicing “No Money Down” investing. I have talked to him several times over the last year or so and yes, he got himself into a pickle.
He watched those same TV infomercials that you and I have seen late at night. He heard about this wonderful world of real estate investing with no money down. He decided it was for him. The problem is he did not educate himself. He decided that he knew enough watching those 30 minute success story shows that he could go out and do it himself.
He began by working with a real estate agent and mortgage broker. Please keep in mind that this was in a good market during 2005 to 2007. He found a typical “good deal” on the MLS that his agent “told” him was a good deal. He went to a mortgage broker who lined up a “really good” no down payment, interest only, negative amortizing loan that allowed him to roll in his closing costs. He then rented out those properties with negative cashflow.
He did this several times. Over and over again, he
buy my house at full retail. Over leveraged it and then rented it out for less than his monthly payments. You know, this is a real life version of the old story that if there is enough “Gross Revenue” there has got to be some “Net Revenue” around here somewhere.
He was all set… All set for disaster that is!
Anyway, with the market change and renters not paying on time and then having to evict them; problems started. The adjustable loans began adjusting and then the financing criteria began changing, so there were no loan programs to do a “cash out” refinance. Soon he was in a bind. Long story short… he is in big trouble. He lost his credit and properties and everything else. Foreclosure and Bankruptcy, Ouch. Unfortunately this is typical in today’s real estate market.
But in his email to me he asked why I still taught “No Money or Credit” investing. Well frankly, because it works. I believe in getting trained properly to do what I am setting out to do. I don’t believe in trying to learn from a mortgage broker and real estate agent who are just trying to make commissions off of my transactions. I would rather spend $5,000 or $10,000 for training where I can multiply that same money over and over again.
If I paid that same money in commissions I only learn from that one transaction. Paying someone who has been there and done that, I learn from every transaction that the teacher has ever done as well as from the people in the audience.
I am not blaming the broker or agent for this transaction. (Well, yes I am… but really they did their job, which was selling their service to the investor. Not teaching him to be an investor.) The root of the problem was the investor. He didn’t educate himself and didn’t know enough about the endeavor to make money.
He still sees me and other people who teach successful creative real estate investing techniques as the problem rather than he who got in over his head and listened to the wrong people as the problem. I teach “No Money or Credit” Investing. The difference is I have yet to put a mortgage into my name and I have a solid exit strategy going into the purchase of the property or
selling my property.
He would have been fine if he would have took it slower, found a deal and then used his buy and hold exit strategy with the proper fixed rate mortgage that allowed cashflow. The problem was he lived in Southern California and when the market tanked, so did he.
Remember there are Winners or Whiners, you choose which you want to be. Take responsibility for your own actions. He made the mess and he is cleaning it up. In a few years he will be in a position to try again. It is his choice to be a Winner rather than a Whiner!
