What Real Estate Mentors Won't Tell You

[Aaron Lietz]

As someone who has paid to go through multiple real estate training programs and mentorships, I'm curious to know your thoughts on what I have experienced, observed, learned, and discovered in the past few years. 

Here are some bullet points:

1.  Real Estate Mentorships can be great for speeding up your education in RE investing
2.  Real Estate programs can help build new profitable relationships that one otherwise would not have had (such as with successful people)
3.  Real Estate Mentors often will not tell you how difficult/saturated/competitive the industry is
4.  Real Estate Mentors often won't tell you how unlikely you are to succeed (similar to the music/entertainment industry)
5.  Real Estate Mentors will often talk down on corporate jobs, even though many corporate jobs have less stress and better pay than running your own real estate wholesaling/investing business (especially when those jobs are commissions sales jobs)
6.  Real Estate Mentors are highly incentivized not to tell the whole truth b/c it does not benefit their income to do so (i.e. - telling the whole truth would mean less mentees signing up for their $10k programs and therefore less money for them)
7. Real Estate wholesaling is similar to the music/entertainment industry in that there is a very low barrier to entry and only a few who will succeed (regardless of how hard he/she works)
   
   

Please note that I am not trying to be negative here. I am trying to be REAL (as I am someone who wants the TRUTH). If I am off the rails on any of these points please correct me and explain how. In my experience thus far (having gone through many mentor programs while also observing how most participants have very little success) I have noticed that RE mentors have a tendency to downplay any talk that would expose the fact that most of their 'students' not only will not have big success in wholesaling (for example), but cannot have that success. This is, again, due to the saturation of the market given the very low barrier to entry.

I recently did the math on a mentee that (on paper) had 'big success' with wholesale marketing/flipping in the state of New Jersey. This person showed that he and his partner had made over $650k in NET income for the 2020 tax year. Pretty good, right? Well, not according to my calculations. Here is the math I did: 

Net Income: $668,631 (13 flips/wholesale deals)
Split w/ partner: $334,315.50
Capital Gains tax: 35% x $334,315 = $217,305
Necessary 2022 marketing capital - 20% x $217,305 =
NET, NET take home - $173,844 per partner

In my corporate sales job I can make between $250-$350k (clock in, close some deals, clock out, and have full benefits). Is the above model worth it? From my view the answer is a clear "NO!" This is especially the case when I compare the work life balance I have now with that of a full time wholesaler/flipper (where they are essentially required to eat, sleep, and breath their business for multiple years with no reliable pathway to true financial independence - 7 days/week and 365 days/year). The way I see it, a corporate sales job can be WAY better than most RE mentors are willing to admit. 

What are your thoughts? Where am I off track here? 

[Account Closed]

Originally posted by @Aaron Lietz:

As someone who has paid to go through multiple real estate training programs and mentorships, I'm curious to know your thoughts on what I have experienced, observed, learned, and discovered in the past few years. 

Here are some bullet points:

1.  Real Estate Mentorships can be great for speeding up your education in RE investing
2.  Real Estate programs can help build new profitable relationships that one otherwise would not have had (such as with successful people)
3.  Real Estate Mentors often will not tell you how difficult/saturated/competitive the industry is
4.  Real Estate Mentors often won't tell you how unlikely you are to succeed (similar to the music/entertainment industry)
5.  Real Estate Mentors will often talk down on corporate jobs, even though many corporate jobs have less stress and better pay than running your own real estate wholesaling/investing business (especially when those jobs are commissions sales jobs)
6.  Real Estate Mentors are highly incentivized not to tell the whole truth b/c it does not benefit their income to do so (i.e. - telling the whole truth would mean less mentees signing up for their $10k programs and therefore less money for them)
7. Real Estate wholesaling is similar to the music/entertainment industry in that there is a very low barrier to entry and only a few who will succeed (regardless of how hard he/she works)
   
   

Please note that I am not trying to be negative here. I am trying to be REAL (as I am someone who wants the TRUTH). If I am off the rails on any of these points please correct me and explain how. In my experience thus far (having gone through many mentor programs while also observing how most participants have very little success) I have noticed that RE mentors have a tendency to downplay any talk that would expose the fact that most of their 'students' not only will not have big success in wholesaling (for example), but cannot have that success. This is, again, due to the saturation of the market given the very low barrier to entry.

I recently did the math on a mentee that (on paper) had 'big success' with wholesale marketing/flipping in the state of New Jersey. This person showed that he and his partner had made over $650k in NET income for the 2020 tax year. Pretty good, right? Well, not according to my calculations. Here is the math I did: 

Net Income: $668,631 (13 flips/wholesale deals)
Split w/ partner: $334,315.50
Capital Gains tax: 35% x $334,315 = $217,305
Necessary 2022 marketing capital - 20% x $217,305 =
NET, NET take home - $173,844 per partner

In my corporate sales job I can make between $250-$350k (clock in, close some deals, clock out, and have full benefits). Is the above model worth it? From my view the answer is a clear "NO!" This is especially the case when I compare the work life balance I have now with that of a full time wholesaler/flipper (where they are essentially required to eat, sleep, and breath their business for multiple years with no reliable pathway to true financial independence - 7 days/week and 365 days/year). The way I see it, a corporate sales job can be WAY better than most RE mentors are willing to admit. 

What are your thoughts? Where am I off track here? 

I feel your pain. I have 25 years of buying and selling properties experience. Someone on BP was whining that they couldn't find a mentor that wasn't $10,000. So, I offered on BP, to train people, For Free on how to buy properties "off market" using little cash. The only catch was that we split the profits 50/50. There were no upfront fees and I'd provide the capital and the training.

I had 12 takers from all over the country, from New Orleans, Chicago, San Antonio, Dallas, Nashville, Seattle, Albany, Amarillo, El Paso, Charleston, Columbus, Indianapolis etc, etc.

I gave an overview and all agreed to the program. I started by explaining what the fundamentals are, how to do the paperwork and how to find leads, what to say to the sellers and so on.

Everything was going great until we got to actually talking to prospective sellers.

A month in, only two, a guy from Chicago and a guy from San Antonio would actually call prospective sellers. Everybody else dropped out at that point. (Too busy they said, not a good personal time to do this they said) and other excuses.

The guy from Chicago got hung up on NOT going more than 10 miles from his home and wasn't able to find a property that wasn't ridiculously expensive. The guy in San Antonio did a bit better but every property he looked at was on the MLS. The whole point was to buy OFF market, not the MLS. He couldn't wrap his mind around talking to people who hadn't listed. Within another month he was gone.

Would I do that exercise again? Probably not. I spent too much time taking their phone calls, teaching, mentoring, encouraging and I was very nice through the whole process, they simply didn't follow through. 

My question is that, since 90% of people won't follow through (and that is not the mentor's fault) that is statistics, why spend the time with people not committed to the objective? I'm rich because I did the work, I stuck to the objective and I learned as I went. It isn't any different than any other endeavor. It takes work and perseverance and if you stay the course you win. If you flame out you're a wannabe.