Am I being scammed?

Question

Hello everyone,

I need your help, but first a little background on myself.  I am 25 years old and fresh out of college.  I discovered the world of real estate investing after reading rich dad, poor dad and have been hooked ever since.  For the last couple of years I have been wading through the world of books seminars and gurus trying to figure out how to get started.  I didn't spend money on gurus or seminars but I do feel like I now have an idea of what kind of real estate investing I want to do and how to get started.  So I recently moved to the Northern Va/ Washington DC area and decided to stop reading and start moving.  I have no money and bad credit (both of which i am trying to remedy) so with that in mind I found a rehabber in the area who will let me help him out with no money involved for 20 percent of his net profit.  I thought this was a good way to get started and so far it has been going well.

Here's where your help comes in:

My partner and I recently met with two wholesalers who had a couple of deals that we are interested in.  They told us at the end of the meeting that they would send us an email with more specifics yadda yadda.  I didn't say a word during this meeting, although I had been on the phone with them all week setting it all up.  A few days after the meeting I got a phone call from them telling me that they wanted to meet with me without my partner because they wanted to offer me a job.  So I went and met with them and they basically told me that the formula my partner is using will not work in the current market. (he won't get into a deal without a 20% projected profit margin for him)  They then told me that they wanted to get out of wholesaling and start getting involved with young investors who want to make some serious moves.  These are young guys (late 20's early 30s) one of whom is a mortgage broker and one of whom is a contractor.  They have been wholesaling for 5 years and told me that they want to work with me directly.  I explained my money and credit situation and they said that it was no problem, i didn't need money and they would help me fix my credit.  They will find the deals and they want me to partner on owning them.  In my head I am thinking: a)this sounds too good to be true.  b)i may or may not end up being scammed

What do you think?  They are really nice guys who gave me a 20 minute shpeel about how its all about helping out other people.  I want to think that they are genuine, but I also don't want to get screwed before I even get out of the gate.  I consider myself a risk taker but am interested in  your opinions.  Sorry this is such a long post!

Thanks for your input,

Michael

Michael Rossi · Answer

Let's look at this logically.  If they were successful in their wholesaling business, they would be making a lot of money.  In that case, they wouldn't need you.  That leads me to believe that they are failing just like the vast majority of newbies who don't succeed.

People do NOT offer genuine business opportunities because they want to "give something back".  That's just b.s. meant to make uninformed newbies feel better about parting with their money.

If these guys were legitimate businessmen, they would be looking for a successful partner, not a newbie.

My best advice is to study hard and learn the REI business.  Take on an extra job if you need to.  Pay your bills and repair your credit.  Then, start your own business and control your own destiny.

DON"T FALL FOR SOMEONE'S SCHEME!

Ryan Webber · Answer

I have personally offered a geniune business opportunity to complete newbies and I did not want their money or their credit.  I wanted their time and their ambition.  I've offered a partnership where I would pay for all the start up costs, I would finance all the deals, I would train them on everything to do, and I would personally babysit the entire thing, and I had people turn me down.

I was looking for someone to duplicate my time.  I wanted someone who was going to be excited about putting in long hours to build a business.   I wanted someone who was eager to learn and excited about making some money, but I did not need anyone's money or credit.

Now again, my intention was not JUST to give back, but it was to make money by building a business by giving back.

Not to say that this is what these guys are doing, but I do think that it may be possible that they have some type of profit oriented business model for what they are doing and it not be a scheme.

One of the local wholesalers I know has focused entirely on raising up newbies to buy and sell deals to.  Some of the deals he's done were questionable in my mind, and I've heard that some people feel like he burned them with a bad deal that was being sold as a good one.  Either way his model works whether he was being upfront about it or not.  He has a network of people bringing him deals and he has a network of people wanting to buy deals and he just connects the dots.

My point is that there are some possible legitimate business strategies that these guys might be employing by raising up newbies for wholesaling.  I'm just curious about it because they didn't communicate that strategy to you.  I would think that being clear about WHY they are doing something is essential for you to be able to trust them.

Jon C. · Answer

I'm just a noob but this seems weird to me. They are a)experienced, and b)a contractor and a broker. You are a)broke, b)inexperienced and c)credit poor.  Why exactly would they want you? They apparently have money but want you to also put in money with them, while they find the deals? It seems to me, if I wanted to hire someone to train, I would use them for the grunt work, not invest.

Also, if you did work with them, would you lose your relationship with the other guy? Finding a mentor willing to actually train you, pay you, and let you learn from them is pretty damn valuable. I don't know if I'd risk that for these guys.

Ryan Webber · Answer

I've read this post a couple times.  I have mixed feelings about it.

First it seems odd that they want to partner with you.  Why do they want to?  Not that I am not a believer in the altruistic nature of humans, but I am also a believer in the scheming nature of humans.

I would guess that there is more to the story.  They may want to branch off into other areas of investing, but don't want to give up their wholesaling business.  So training someone up and taking it over may be a good idea, BUT why didn't they say that.  Or maybe they figure if they partner with 10 different people who they train up then they end up building their own network and their profit potential and in the process be helping people.

The thing of the matter is that if you have bad credit and no money, then what are they after from you if they are scheming.  Some type of mortgage fraud where you take the fall?  It doesn't seem like you have much to offer a fraud operation.  No doubt new investors would be a prime target for some of the schemes I've seen, but normally they at least have good credit to take advantage of.

Now from my own experience, I have personally offered the opportunity of a partnership to certain people who are in similar circumstances as you, and they turned me down.  My goal was expanding into other markets, and I ran into people who turned me down because they thought it was too good to be true.  Go figure.  I was very upfront in WHY I was doing it, and it was definitely for personal gain while helping people become successful in the business.  I got the best of both worlds, but I had few takers.

I would recommend that you do some extensive research on them.  Find out from other people how they do business.  Start researching other investors or realtors that have done business with them and see what they have to say.  Not that I would take everyone's opinion at face value, but I definitely would want to know what people are saying about these two.  If they have been in business for 5 years then they should have a reputation in the business.  What matters is what type of reputation do they have?