Nothing quick about getting rich with real estate

By MP Dunleavey

Like a lot of people these days, Marjorie Stark wouldn't mind making a little extra cash -- or even a lot of it. So when she attended an information session for Robert Allen's "Creating Wealth Through Real Estate" seminar in New York, she was more than willing to pay $2,495 for Allen's intensive three-day course on real estate investment strategies.

Concerned about not having enough to retire on and wanting to pass along some wealth to her kids some day, the 62-year-old New York City educator said to me then: "I am convinced that real estate is the way to go."

I was there that night, too, and I could scarcely resist the mouth-watering idea that those three days could make me rich. As the guy leading the session announced: "We are on a mission to create 1,000 new millionaires in 12 months!"

A year later, Stark isn't any closer to being a millionaire. She hasn't bought any new property nor made any money on real estate -- except for the rental property she owned before and bought "the hard way" (with cash and bank loans). She even admitted that when she saw Robert Allen's newest venture was in vitamin sales, "I thought I was going to puke. I was very disillusioned."

But Stark is undaunted and still believes there are fortunes to be made in real estate. She just enrolled in another seminar at a local college on how to buy distressed and foreclosed properties, she says. "With a full-time job, I'm not sure how I can do it, but, boy, am I itching to go!"

There's something about real estate

Stark is not alone. The National Association of Realtors doesn't track independent real estate investment seminars or how many people attend them, but their allure springs eternal like the get-rich hopes of those who sign up for these courses.

The odds of winning are not high. Robert Allen's "1,000 new millionaires" never materialized in the last year, for example. Allen operates what's called The Enlightened Millionaire Institute. Its Millionaire Hall of Fame Web site lists only 50 millionaires (defined as having generated gains averaging $2.6 million). A spokesman admits not all of them exclusively used the Allen method of real estate investing. (And, in a disclaimer, the site notes, "No information has been verified or authenticated. Results vary. All successes are subject to one's own knowledge and effort.")

Despite all that, the Robert Allen Institute still conducts two or three seminars a week in different cities and says it reaches about 1,200 people each month. (That's 1,200 x $2,495 = $2.99 million a month, in case you left your calculator home.)

Allen is just one of dozens of artful salesmen who preach fancy financing, "no money down," flipping properties quickly and numerous other strategies to get rich buying and selling real estate.

And the question all this preaching raises is, do these investment techniques, systems and strategies really work? Can they actually make you rich? After all, would people keep trying it if it couldn't be done? Or are hundreds of thousands of people simply seduced by expert sales pitches and swindled out of hundreds and sometimes thousands of dollars?

Weighing the evidence

Like so many things in life, it depends on whom you talk to. Or whose Web site you believe.

John T. Reed is a real estate investment coach himself, based in Alamo, Calif. He's also a self-appointed watchdog for this industry. He keeps the most exhaustive list I could find of dozens of so-called gurus, along with reviews of their techniques, books and other products.

Although Reed's Web site, where you also can buy his various books for $29.95, reads a bit like he has a chip -- a very big chip -- on his shoulder, he was recommended by the National Association of Realtors as a serious investigator in the industry. Not that he's against real estate investment, or some of the reputable folks who teach their own hard-won wisdom. But those have been degraded by "the endless parade of B.S. artists coming into the real-estate-investment-advice field. It is an embarrassment to the good people in the business."

And many people believe his grousing is justified. Norm Bour is the host of "The Real Estate and Finance Hour" on KLSX in Los Angeles, a top talk radio station. He's worked in real estate as a mortgage lender and describes the proliferation of real estate seminars, workshops and scams as "a major pet peeve."

"Case in point: foreclosures," he begins. "Real estate in California has gone berserk in the last few years so people are looking for foreclosures to buy." The idea being you can buy a foreclosure more cheaply than other property and potentially gain a windfall when you sell it.

But, as Bour notes, "You can count on one hand how many actual foreclosure properties there are (for sale). Yet there's no lacking of people who are offering real estate foreclosure lists." One might pay $35 for a list, but it may be peppered with properties in other states. "It's not fraudulent, but it's certainly deceptive."

The shady gray area

Well-known personalities like Robert Allen or Carleton Sheets, who have extensive marketing organizations, are a little different, Bour says. "They offer some very solid basics, but the number of people who can do what they propose is very small -- because they make it sound so much easier than it is."

That's what Josh Kelinson, a freelance advertising consultant in New York, found when he and two friends tried to follow the Sheets method.

The three pals pooled their resources to master what Sheets preached, which is similar to the Allen method: buying property with no money down (or some other creative financing method) and flipping later on for a profit.

One of his pals took the seminar, another bought the 8-CD set, etc. Thus inspired and determined, they tried to buy a building suitable for five apartments in Massachusetts, not far from where they'd all grown up.

Kelinson says the actual experience of trying to buy an income property proved eye-opening. "We spent a ton -- and I mean a ton -- of time on it. There was the approval process, the paperwork, getting lawyers." It took two to three hours a day, not including weekend travel time and unexpected snafus. "I found it impossible to do with a full-time job."

Ultimately, the project bogged down because of a major zoning problem. The building was in an area zoned for three apartments, and the building had been illegally converted into five apartments. The zoning authorities refused to grant an exception to the rules. Then, the building owner refused to return their deposit. The three were out $35,000.

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