Finding A Deal Equals 50% Of The Profit... Is This A Scam?

Question

My local REIA has been in operation for 10 years. I went there 4 years ago and met the owner.

I went to the monthly meetup which was the first one post-COVID. They said that if you find the deal, they'll JV with you and give you 50% of the profit. So if the profit is $20k, they'll give you $10k. This included letting you know if a deal was good or not and setting you up with one of their coaches as part of a coaching program. The coach would show you the process to flipping a house.

I'm somewhat skeptical. I even told the owner after the meetup that it sounded very generous. He said that finding a deal is not easy. My skepticism comes from being in business. From my experience owning businesses, marketing only usually seems to take 25-30% of a company's budget. And coaching someone is very involved.

They also have a lending business that they're trying to grow so maybe this is a reason why the program is so generous. They want to attract lifelong customers. I also thought that it could be a way to give back. Giving back and generosity seem prevalent in the real estate community. But so do scams.

I asked the owner if I needed to put up, say, $10k in exchange for a piece of the profits. He repeated the terms (Just bring the deal and we'll give you 50% of the profit.)

I noticed that they have coaching packages online (very expensive training sessions... what I would expect from a guru). But their Facebook reviews are very clean and date back 3 years (although they only have 5 reviews... none appeared to be coaching related).

So scam or no scam? Is it worth finding a deal for them or not?

Jay Hinrichs · Answer

The big question is who is putting up the money to buy and rehab the property.. IF they are and there is ZERO cost to the capital other than and Equity split.. then thats a smokin deal for someone starting out. risking a grandola to give it a try what the heck .. risking a 30k coaching package maybe not. or 10k.. most of the guys that do the you find em we split profit want 5 to 10k for the privilege to bring them deals :) Also want to add its uber hard to find deals now.. and a lot of the revenue stream for these type of companies is knowing they will pocket the up front money and never have to fund anything B/C the newbie simply cant get a deal good enough for them to bite on .. they put the BAR WAY hi and it cant be reached .. some of the NO money down Hard money lenders we see have been accused of this.. people pay up front fee and then 500 to 700 per submission only to get turned down time and again because the projects dont meet their uber rigid underwriting so they have a legal way of saying NO and keep your money in the process.. I mean how good is it to take money in and rarely loan it out or buy anything.. Its just a dream come true ..

Joe Villeneuve · Answer

Sounds like they are still in "old school" mode for many things. I could be wrong, but it sounds like they are training you to be their wholesalers. Trouble is, that really isn't training you to be a REI. I guess it depends on what you're looking for from any training that you get.There's nothing wrong with "guru events". I've attended many and bought many of their programs, and I can say that they all had some value to me. They all have the same disclaimer about the student being responsible for what happens after the training takes place...and there's a lot of truth to that. Trouble is, most of them don't really give the student enough direction on where to start, and I've yet to find one that provides a way of actually doing deals for practice, without actually doing them. When I used to design all the education in my REIC group, years back, I would design "interactives" which forced the students to actually execute what they would learn...I still do that today. I found that if the student actually lived through the examples, rather than just reading them, they not only became comfortable with what they would learn, but they also gained the confidence they needed to start doing it...for real.

Joe Villeneuve · Answer

None of what you said gives me the impression that it is a scam,...but that depends on your definition of scam.First, how much is very expensive when you refer to the training they offer?Second, I noticed you never used the words, "it sound too good to be true". If you did, I wouldn't bother to respond. When someone uses those words, it tells me more about the person saying those words then what they are saying them about.Third, what type of business are you in? Marketing today is very different, and costs are a lot less, then it ever has been. Most marketing is designed to be presented to a group where the success of that marketing is based on a percentage of clients/customers acquired from that marketing, so the small percentage of success must cover the cost of many. In this case, the same marketing cost doesn't really exist. They appear to be using a large part of what would have been that cost as your returns. Kind of like paying for the marketing after the fact...in a much more efficient way.Four, this sounds more like a paid form of "bird dogging", and the paid training is for them to make sure you are bringing them what they want, and not just what you can find, and so that you don't waste your time bringing them what they don't want. I know from my experiences, there's a lot of time wasted (mine) sifting through "great deals" brought to me by wholesalers and bird doggers that are really garbage. I train my wholesalers. This sounds more like what they are doing. Charging for it is a way of vetting out the tire kickers. It they're serious, they will pay, and if they learn, they will recover that cost quickly...tenfold.

Joe Villeneuve · Answer

You said it partner.

Mike Schorah · Answer

@Joe Villeneuve Thanks for the response They have 4 options. One option is $600. One option is $800. One option is $2k and the last option is $2.5k. The program seems to be pretty intense. Unlimited calls/emails. An hour per month of private coaching. So I'm not sure if this is completely separate from the offer of 50% profit if you find the deal plus coaching...OR...if they'll do a bait-and-switch and when you find them the deal, they'll say that in order to get the training, you have to pay for one or more of these packages. It definitely seems like work needs to be done. I'm calculating that I'd need $4k-$5k to find a deal using driving for dollars and skip tracing. It doesn't seem like a get-rich-quick scheme. I'm in manufacturing, but the businesses that I owned were a residential flooring company in 2007-2008 and a general contracting home improvement company from 2013-2014. Not sure about now, but marketing definitely shifted from 2007 to 2013... mainly from newspaper and Yellow Pages to SEO and PPC, but that's the construction industry. Every industry seems to gravitate towards a different form of advertising. But I definitely can see why they'd use a coaching model like this. Going to my $10k profit, if I'm spending my hypothetical $5k, then my profit would shrink to $5k. But if I go for bigger deals, then it would grow (i.e. $40k in profit would give me $15k ($20k which is the 50% minus the $5k D4D/skip tracing). They did say in the meetup that you can email them and call them anytime with deals and they'd get back to you. I don't know how quick the response would be, but that part kind-of sounded like a no-cost obligation, especially since I clarified it after the meeting when I asked "So, I bring you the deal and I get 50% profit and you show me the rehab process?" "Yes. It's not easy finding a deal." The above mentioned coaching options were what I found on the website after the fact, so I don't know if the website had been updated and I don't know if this is a new program they're offering. There is not a copyright statement at the bottom of the website identifying the year and I know that things could have changed because it has been 17 months since COVID started and since their last monthly meetup. For instance, the meetup used to be at one location in the email and it was later changed to another location (where the meetup actually was) in a separate article. This seemed to be a miscommunication with their staff (which I verified later). I'm not saying that this is reflected on them. They were very professional and knowledgeable about real estate and I had attended one of these meetups in 2017 which doesn't make it come across to me as being a typical guru event. I'm not sure how they're vetting out the tire kickers. From the sound of it, it sounds like they'd just take a longer time to respond to emails and phone calls when they find out that someone is a tire kicker. And when someone is putting in effort, for instance there was a guy at the meetup that was actively doing text marketing and cold calling and he had been doing it for a bit of time.. both of the presenters actively went over and handed out their card to them. They didn't give their card out to anyone else, but did mention their email address to the group as a whole.