A Big Pyramid Scheme?

[Anthony Gayden]

Does real estate investing ever seem like a giant pyramid scheme to anyone else? The way loans, lending, payments, and everything works almost seems like a pyramid scheme. Throw in syndications and private money and you can see the similarities. The reason I bring this up is because it seems like there is a very thin line between legal and illegal practices sometimes especially when it comes to borrowing money or raising money to invest. I was watching American Greed and it occurred to me that some things aren’t pure black and white but things get out of hand quick.

[Jay Hinrichs]

@Mike Dymski  having been and worked for the 80s versions of modern day syndicators and having had a front row seat to the melt downs.. your exactly right it starts off very innocently.

usually because they have so many investor in so many deals they don't want the word to get out that they have a bummer.... so lets just borrow from the reserve account of  Del Boca Vista Number 1 it will be short term loan we have the right to do it.. :)  then it just starts to go down hill.

also many times these high flyers are very late to change their lifestyles.. and that adds to the cash flow stress.

I mean I was totally stressed in those days I got wrapped up in a Civil rico with one of them.. I was the selling broker on a deal No ownership interest not an employee etc etc.. they sued every one..

So to this day I personally will never ever have anything to do as a sponsor for syndication .. I have invested in a few with those I trust a bunch.. but I would never do it with a beginner etc.

@Joseph M. Even though we see adverts for subprime coming back like in the Scottsman guide I don't see them happening in practice I have yet to see one in any of my retail sales I have made in the last 18 months.. FHA yes .. but two loans no money down bad fico no have not seen that.

that product is needed in certain markets like in MS the average credit score is 600 you need some version of sub prime other wise half the state will never own a home and probably 70% of the state. Good for landlords tough on buyers.

@Kyle J.  I am with you after watching American greed I don't know how any of us raise investor capital.. I know how I do it.. and I do it with a transparency that is so 100% bullet proof and that's the only way a little guy like me can do it I am thinking.  the American Greed with Ed Okun who stole all that 1031 money as an accommodator.. coming to realize that 1031 is not regulated in any manner that was a shocker... and now you have the guy In FLA who has it Appears based on BP post done the same thing..   anyway I love that show as well.. but usually its investors being too trusting and not getting any verification other than internal reports from the sponsor.. the bank accounts don't lie and unfortunately when you go into many of these deals like Crowd funded deals you have no Access to the bank account.. so really its what ever reports they send back.. its only when you check the  actual bank accounts does reality come to play.