Beware the Real Estate Gurus
Welcome to my weekly skeptical investor BP Blog Post! A frank, hopefully insightful, dive into real estate and financial markets. From one real estate investor to another.
Today’s Read Time: 10 minutes.
Today We’re Talkin:
- - The Weekly 3 - News, Data and Education.
- - Special Holiday Edition of the Skeptical Investor
- - Beware the Gurus.
- - 2025 is the Year of the Mule!
- - My Skeptical Take
The Weekly 3: News, Data and Education to Keep You Informed
- - Wall Street sees fewer rate cuts in 2025, and potential rate hikes, predicting that -
- - U.S. home prices will rise +10.8% in 2025 (Apollo).
- - The US Economy is firing on all cylinders going into 2025 (Apollo).
- Atlanta Fed sees Q4 2024 US GDP growing at 3.2%, far above forecasts (Atlanta Fed, Yardeni)
Today’s Interest Rate: 7.16%
(👆.23, from this time last week, 30-yr mortgage)Famed astronomer Carl Sagen once said about reading and writing:
Well, here goes nothing…
2025 will be the Year of the Mule!
A mule you say?
I do kind sir!
What the hell does this mean?
I’ll tell you.
Let me tell you a short story, of forewarning!…
Recently, I’ve noticed quite a few new entrants wanting to jump into real estate investing, spurned by many a source: a friend, a Facebook post, a book, the desire for more time freedom (hopefully), to make $ for you and yours (yes please) etc...
I say welcome, to all these new entrants. Any way you can get into the investing arena, let’s go!
Well, mostly…
I word to the wise. Remember…. that while you likely need some capital to start investing, there is no entry fee to get started. It just takes your effort, which is always free. Educating yourself with podcasts, books (pretty much free), the YouTubes, Twitter threads, amazing newsletters (clears throat), and talking to real estate professionals like your agent or contractor… this all costs you nothing. And there are plenty of resources out there you can avail yourself of. It’s like school, you get out of it what you put in (eh, can I get that grad school tuition back? Could’ve picked up a nice triplex instead. Ah!)
So be careful not to spend unnecessarily. Especially when it comes to the “guru’s.” You know, the real estate bros (mostly) that want to sell you that entry ticket.
Let me clarify, with a story.
I was speaking with a prospective buyer this week. Susan. A really great lady. Genuine, kind-hearted and looking to change her life. She read one of my articles (ok, go on :) and wanted to talk about picking up a property in Nashville.
Fantastico! I’d love to help.
She told me she was working a mediocre job she didn’t much like and wanted to start investing so she didn’t have to work a W2 forever.
Love it, my ears were perked.
We chatted a bit more about her goals and how she wanted to provide for her young son. She had a crystal clear idea of where she wanted to be in the future, but hadn’t yet saved up much to purchase real estate. I told her an FHA loan and house hack could still very much make buying a property possible, with a little more savings, so that wasn’t a dealbreaker (more on this later). Hell, that’s how I got started about 18 years ago.
But something seemed a bit off. She didn’t seem to have a firm grasp on a direction. Frankly, she seems a bit all over the place.
I asked her, “do you know what kind of assets do you want to buy? And do you know what strategy you want to pursue: single-family long-term rentals, fix-and-flip, small multifamily, mid or short-term rentals etc…?”
“Oh no no,” she said. “I’m going to start wholesaling.”
Shit.
My heart dropped, I could sense this middle-aged mother of two had made a grave mistake and got bit on a precarious, shark-ridden road.
I responded, “We can definitely dive into that, and that could be a fine strategy for generating funds, but tell me, how did you arrive at this plan?”
For more background: she was already working overtime to make ends meet, and wholesaling is a full-time gig. It’s an operation, a job, not investing. But because it can require no up-front capital, it’s sadly becoming a popular way to limp into the world of real estate, unprepared. It has also become quite predatory.
“Oh, I found this wonderful course on Facebook.”
Then came the hammer.
“I’m curious, how much did you pay for this course?”
“Oh I got a deal for Black Friday, so far only $25k (on her credit card), and we have 4 more weeks left.”
My heart exploded, mainly in anger. I could picture this exploitative guru in his ultra-modern hillside domicile cycling through zoom calls with this nice lady, and likely 20 others, as he fleeced them for thousands on a course that offered “financial freedom” and “no money down real estate strategies” to folks that - I’ll be judicious here - are ill-prepared to get into the cutthroat game of wholesaling.
“AHHHHHH, shit…” (I couldn’t help myself). “Can I give you some personal advice?”
“Of course.”
“Run.”
We spoke for a while and I learned that she not only had spent $25k on this course (all on her credit card), she told me she enjoyed it and had gotten a lot of value from it and was on the hook for more. She had met I’ve met a lot of great people, and “Landen” really has been great, blah, blah blah…My mind was swirling with frustration thinking about this guru douchebag.
I felt bad for her. She had been taken for a long ride with no destination.
Now, wholesaling itself can be a fine business.
Who am I kidding, it’s a shit business.
But it’s not fraudulent. A little predatory toward homeowners maybe, but not fraudulent. I should also say that I know some wholesalers. And they are good people. They are hugely successful and good at what they do. But they have a real operation. They send thousands of mailers to prospective homeowners, and employ dozens of virtual assistants, AI robodialers and software bots who contact hundreds of prospects daily in an effort to generate leads to purchase properties. Or, more likely, to get a property under contract, flip that contract to an end buyer, take a few grand for their troubles/finders fee, and move on to the next.
And herein lies the problem for Susan.
For most people, this just won’t be something they will be successful at. Sorry, but that’s the truth. The whole game itself is highly professionalized, much like good short-term rental operators. Sure you may get a deal here or there but you can’t support yourself doing it half-assed. It’s hard to compete with these folks and pay for your livelihood, let alone generate enough capital to also invest in real estate, grow a portfolio of properties and retire to financial freedom.
That was Susan’s goal.
So the problem is not with the wholesaling profession per se, it is mainly that there are a LOT of online gurus taking advantage of uninformed or gullible folks by selling them a wildly expensive course, based on false promises.
Achtung! Online courses, mastermind groups, and coaching are big business. Yes yes there are some extremely valuable ones out there. And for those with the means, paying a few hundred bucks a month or even a few grand (not $25k!) to get educated and hit the ground running is a good idea. Hell, I’ve been in a few masterminds, they were fantastic and I met a ton of future investors in my deals that way. They offered a valuable return on my investment. Not that I am better than anyone. But I was already a savvy investor, full of tough life experiences in the real estate investment arena and I had a specific need that I was laser-focused on. I was in a different phase of my business career. And I’d already tangled with a few bulls and lived to tell the tale.
So it pisses me off that these folks are out there. They KNOW many of their students won’t be able to handle a wholesaling operation and the rates they charge are downright fucked up.
But they do it anyway.
A quick search of “no money down real estate” returns hundreds of wildly expensive courses, events and masterminds, and also articles and books, all trying to sell this strategy. Take it from me, read articles, listen to podcasts and buy books. Do a few deals and only then consider joining these folks. Talk to multiple real estate professionals like a realtor, contractor, cousin, inspector, appriser, etc… and then decide. You may find there are far better ways to get started in real estate, with little capital. And they don’t require you to swim in the shark tank.
For Susan, I recommended stopping the courses. I sent her a few books and podcasts on investing. And I recommended the strategy of house hacking with an FHA loan, which she could realistically execute in the next year or two (after hopefully paying off that painful $25k in credit card debt).
Hopefully, she can get back on track to achieve her goals. And potentially get some of that money back from that predator. I’d like to give him a piece of my mind too.
This is all to say….
I am officially declaring 2025 as the Year of the Mule!
Why?….
My Skeptical Take:
Did you know Mules are hardy, live longer, and eat less than horses?
They are less stubborn and more intelligent than donkeys. Their skin is not as sensitive and can withstand harsher weather.
So in 2025, us investors need to be more like mules.
Much like any other form of entrepreneur, we have to be resilient and find opportunities in the face of challenges.
High interest rates for longer? Good, the rookies won’t be able to compete. Time to pick up a deal.
Low existing home/value-add inventory? Good, time to get creative. Build out that garage and rent it as a studio. Finish a basement, add 2 more bedrooms to the rental, and rent by the room.
Numbers don’t work? All the listings you see are over priced? Good, write 25 “disrespectful offers” (shout out 1-Rental at a Time, one of the good gurus), get 3 countered, and 1 accepted. You may catch a lot of shit from the listing agents, but c'est la vie.
All this is to say, there are no shortcuts.
You have to do the work.
So when life throws you for a loop, sometimes you have to retreat, reform, reconnoiter, re-strategize, reeducate and….
Kick sideways! (yes mules can kick backward and sideways. Crafty buggers).
And while mules can live 50 years, we won’t need that long.
This Winter, 2025, is the time to get fit before you have to show off that Spring body. You should be able to pick up a deal in the next couple of months.
Here are 3 quick steps to get you on our way (all basically free):
- - Practice running your numbers. Get this book:
- - Listen to investors doing it in the arena.
- - Talk to a real estate professional. . They can help guide you and be your anchor on the ground.
Yes, interest rates are high. The bond market vigilantes are fighting the Fed. Today the 10-year treasury hit 4.59% and is up nearly 1% since the Fed started cutting rates (remember, mortgage % track the 10-yr Treasury bond %, which has been highly volatile).
The bond market does not believe inflation is yet squashed.
For prospective homebuyers, this makes buying a home difficult. Mortgage rates are a whopping 7.16% today, up almost .50% in 2 weeks!
But the environment for investors is extremely positive.
High rates bring less competition for great deals.
So, as we turn into the post-election corner, I’m shifting into second gear, ready to explode out of the corner and hit 2025 at full speed.
The future looks bright!
I’ll say it again, now is the time to pick up a deal investors! We are at a potential crossroads in markets. Housing inventory is up and buyers have the power in negotiations. Deals are out there to be had.
What am I doing? I just picked up a lovely little duplex way under market value a few days ago and renovations have just begun.
Another anecdote: I just had two savvy clients pick up a large duplex deal for $25k under market (ie $25k under median comparable sales) on a $400k property here in Nashville. After adding some value, and pushing up rents to market, they are absolutely going to kill it on this deal. Super happy for them.
They are IN the Arena.
We all want to grow our wealth for us and ours. The only question is, what are you going to do about it?
Just remember. Always Protect your downside.
It’s your money, your life, and your responsibility.
Merry Christmas and Happy Holidays!
Until next time. Stay Curious. Stay Skeptical.
Herzliche Grüße,
Andreas Mueller
P.S. - I’m pleased to report that we got Susan on the right track! She is fast on her way to paying down her credit card debt, successfully negotiated a raise at work, and is almost done saving for that first house hack property. Again, anyone can get into real estate. Just be careful out there and always build a trustworthy team on the ground to take care of things.
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