$10,000,000 real estate investment secret? Not!

Recently I received an email claiming that a certain promoter had been offered over $10,000,000 for his exclusive program by “a guru”. So I did a little research. (Its amazing what you can find online.) Unfortunately I am having a real hard time believing that this is accurate. The program promoted claims that it can put $10,000 or more in your pocket in 10 days. The sales material says that it usually costs about $500, but you can buy the kit now for only $39.95. Pretty sweet deal huh? Do you have any problem with this scenario? It seems to me that if this individual could in fact make one sale to the Guru for the same amount of money that he would make selling 300,000 of his kits, that he would opt for the one sale. I would have. I’m betting you would too. Let me save you the $40.

My research indicates that the program taught is one of the oldest methods for making money with real estate that there is. Much of the promotional material tells you what the program is not. Well, then let me tell you what I believe it is. It is a simple process usually accomplished by what is called simultaneous closings. Here’s the condensed version.

1. You find a deal that you can buy for less than you know you can sell it for.
2. You put the deal under contract with the ability to assign the contract.
3. You sell your interest in the contract for the difference between your purchase price and the amount of total investment the new buyer is willing to make.
4. The deal closes and you keep your spread.

Its not rocket science. This is same concept that is applied using various techniques. In one case an individual may use a lease/purchase option. In another they may just use an option to buy. In both of these cases their documents need to allow for an assignment of interest. Another way is to have a special deal allowing this with the seller. This is problematic.

There have been problems with breach of real estate licensing laws in a few states where individuals have received an agreement from a seller that establishes a price the seller will take, and allowing an individual to sell the property at a higher price and keep the difference. I believe that the problem with this structure is that it produces an agency relationship between the seller and person originating the agreement. It is obvious from numerous lawsuits that there are a number of regulatory groups that share that opinion. If the individual attempting this process is a licensed real estate professional then this structure constitutes what is known as a “net listing” which is specifically prohibited in most states.

So there you have it, straight up and to the point. Can this form of real estate investment work. Sure, it’s possible. Just take the time to do it right and keep it legal. Like any specific limited-use technique this process can provide for opportunity. Just recognize that it does so only in a greatly restricted number of cases. It is good to add it to your tool box, but don’t count on it to build the house for you. Wise real estate investment and operation requires that investors learn everything they can about the business. Only in this way can they recognize opportunities available and have the overall skill set to capitalize on them. Remember what Earl Nightingale said: “A great occasion is worth to a man only what his preparation enables him to make of it.” So get prepared for your opportunities and be successful. Good luck in your career. If we can help, we’d love to.