Are you serious? The only guarantees in life are that we are going to die and pay taxes until we die. In some cases, we will pay taxes even after we die. You have to love estate taxes. You work all your life and pay taxes on the money you make, and then the government wants half of what you got when you die. But you know what? That’s a guarantee.
In this article we’re going to discuss some of the creative marketing strategies being used to sell houses to unsuspecting investors.
Let’s just start with some of the gimmicks or promotional pitches that promoters use to sell houses, especially to new real estate investors. Just read some of these sales tactics below that have been used by “turnkey” house promoters.
“This is only available today because I have other buyers that want the house.”
“There is a lease option tenant in the house for twice the amount you are paying.”
“Your rent is guaranteed by Section 8.”
“The tenants are in credit repair and they will buy the house when their credit score rises.”
“We will pay you a year’s rent in advance if you buy this house.”
“We guarantee the rent.”
“Prices will double in three years.”
“You have to give us a down payment, and then wait until we find you a house.”
Folks, let me tell you something. The only guarantee when you buy real estate is: there are no guarantees. Promoters and house hawkers can say what they want but at the end of the day, you had better do your due diligence.
Don’t count on promoters telling you the truth when they stand to profit on your purchase. And for gosh sakes, never buy a house based on the pretty pictures. Pictures are deceiving and any house can look good from certain angles, and it’s easy to avoid the bad angles or for example a collapsed roof.
Usually when something sounds too good to be true, it is. Therefore, you need to do your homework.
When turnkey operators start talking about guaranteed rents, they probably mean it – right up until they have thirty vacancies or excess repairs and can’t afford to pay you. Oh, I know some guys that will actually pay you a full year’s rental income in advance. But you have to ask yourself a question, “How can they afford to do that?” It might just be that they made so much money on the sale of the house to you.
Ah yes, the unwise use of leverage. New investors on the scene right now don’t have a memory of how leverage can get you in trouble. Just try missing a few months rent and having a few extra repairs, then see how that feels when you’re writing the mortgage check.
You deserve to lose your money if you blindly invest with someone that you have never met, or know nothing about.
You deserve to lose if you don’t watch videos of the house and neighborhood; and this is only if you can’t go see it, feel it, and get a sense of the neighborhood for yourself.
When someone tells you this is the last house or the best deal ever, you need to slow down and see if this house stands on its own merit. And never, I mean never send money to anyone, including title companies or attorneys to get on a “list” to buy a house.
Ever hear of title companies going bad?
Ever hear of attorneys stealing money?
Ever hear of Mason Hill?
Mason Hill recently used a Ponzi scheme and bilked investors for $20,000 per house to get on a list to buy a house in the middle of nowhere in Florida. Some investors had sent money to a title company that doesn’t return phone calls.
The truth is folks that when you buy real estate, there are no guarantees – period.
You analyze the information and you make decisions based on your analysis. But the funny thing about real estate, and I am particularly writing about houses is: people live in them, and things happen to people. They die, lose their jobs, move to take care of ailing family members, get into car wrecks and you won’t believe this but, sometimes they lie! And you know what, so do some realtors (although most are just stupid) and so do some promoters.
Cash flow houses are really one of the best investments you can make right now because prices are 50% less in most markets than what they were a few years ago. But don’t get sucked into gimmicks or the hype and buy cheap houses in bad neighborhoods or old houses in areas with decreasing populations. Whenever possible, go and see for yourself the houses you are considering purchasing.
A flight and hotel room is a cheap price to pay for making a bad acquisition that could end up costing you a lot more. And by the way, I, yes me, bought bad houses by looking only at the pictures.
I bought these bad houses trusting a promoter who lied – all 33 of them. I bought bad houses that I didn’t go see for myself.
I’ve bought houses, not always good ones, because another buyer was “coming right after me.”
With experience comes wisdom and trust me, it’s better to learn from someone else’s experience.
We have over a hundred tenants with options in our houses. These houses are sold to investors and sometimes the option price is double what the investor pays. But that doesn’t mean that the tenants will ever buy the house.
No one knows what lenders will be doing in three years.
No one knows if the tenant will keep their job.
No one knows what appraisals will be like in three years.
I don’t even know what I am eating for dinner every night.
But you know what?
We know we are selling houses for about 50% of what they would cost to build new.
We know that the rents should generate over 10% cash on cash returns for investors.
We know that risk is reduced when you avoid leverage.
And we know where people are moving to, thus values should rise in these areas as the supply is absorbed.
And you should too.
Turn off the TV, stop reading the paper and buy a cash flow house while prices hover at the bottom of the market.
Here are a few video links of previously acquired properties in the Atlanta area.
http://youtu.be/qLwzwV3mLrs – 24 Citadel
http://youtu.be/qZp6ydDvSUM – 11221 Aliyah
http://youtu.be/fOGCoH1B3LM – 10 Amber Way
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