I often receive enquiries about real estate seminars which are portrayed as educational seminars but in reality, they are nothing more than property marketing exercises designed to flog overpriced properties to graduates of these seminars. Generally they are promoting new properties where naïve investors are unable to add real value to make a profit for themselves.
Some of these seminars sell for as much as $10,000 and teach investment strategies that are sympathetic to the type of properties that the promoter is selling. Now the issue here is not the cost of the seminar, because there are other courses around which sell for even more. The issue is that an increasing number of seminars are not simply information based seminars where the main aim is to educate, but are in reality, nothing more than clever property marketing tools.
I’ve got nothing against clever marketing, however I do object to people charging you a lot of money and portraying themselves as giving you independent information when in reality they are just leading you towards an eventual sale of their properties. They are not giving you an overall education in property investment. They are presenting information which will induce you to purchase their types of properties.
People often ask me how the material I present is different from what they may hear at some of these property marketing seminars and I welcome this question.
In the first place, I have no vested interest in your investment decision. I present the information with the sole objective of educating you in a wealth creation strategy. I do not sell real estate, shares or any other investment instruments so I do not stand to profit from any investment decision you might make.
The dramatic benefits people have enjoyed as a result of applying the positive cash flow investment strategies I teach, are testimony to their effectiveness. Brett from Ballarat (original letter available for inspection in our offices) says that in only three years he has enjoyed $350,000 capital growth from the 5 properties he bought after having done the Super Secrets to Wealth course. “The No 1 lesson I’ve learnt from your home study course is that cash flow is king! I nearly went down the negative gearing path until I got your material as friends of mine have done and now they are way behind the results I have achieved. Thank you Hans for your independent information. I recommend your material to anyone who wants to work smart today for a better tomorrow.”
Secondly, I teach strategies which you can apply consistently and with low risk to you. By following my suggestions, you won’t make huge profits in a boom only to lose out again in a bust. They may not be as spectacular as the clever tricks of some promoters but at least you’ll be able to play the game for the long term.
Thirdly, I have personally experienced booms and busts, high and low interest rates, high and low vacancy levels and I know how to deal with them. Some seminar presenters teaching you how to become a millionaire by next Wednesday have not been in the game long enough to know how to deal with the changes in the market.
Finally, I present much of my information in a home study kit format so that you can listen and study it over and over again. When you just rely on the information you retain from a seminar, you’ll lose much of it within a few days. Not only that, I provide a no-risk money back guarantee for all the products we supply.
I am particularly concerned about people advocating buying off the plan . . . with deposit bonds and depending on a speculative rise in the market so that ‘investors’ can sell out at a profit in the future by the time they have to settle on their properties.
At the subtle urging of the seminar presenter, inexperienced investors are mortgaging their houses to speculate on the market. This is not property investment . . . this is gambling or punting! This is what happens when greed is fuelling your investment decisions!
Can you imagine what will happen when the market turns . . . as it inevitably will? I’m sure many people will be hurt. Have a guess where the promoter will be then. You won’t see him for dust! He’ll be far away enjoying his proceeds while the disillusioned punters will be selling out at a loss and under pressure in a falling market as their settlement date draws closer. They may even find themselves facing bankruptcy.
Off the plan sales are created so that before construction begins, the buildings are largely pre-sold. For the developer, this is certainly a good strategy and helps him get the finance to build the building. These types of sales are particularly successful in a strong and rising market when there is a shortage of supply. It can be a way to make money provided you sell out during the boom. However, every boom is followed by a downturn.
(DON”T EVER BELIEVE ANYONE WHO TELLS YOU THAT PROPERTY PRICES NEVER FALL! – that’s absolutely incorrect!)
When the market turns as a result of an oversupply of available properties, those properties still under construction will continue to be built, particularly when they have been pre-sold and will add to the over-supply in an already falling market.
The sellers who as a result of attending the marketeer’s seminars were hoping to make huge profits by the time of settlement, now find themselves becoming increasingly desperate to cut their losses and need to sell out at any price in order to avoid going bankrupt, particularly when they have purchased quite a few high value properties off the plan.
How do you think the banks react when the market is falling? Are they likely to lend just as freely as when prices are on the increase? Absolutely not!
Just imagine that you are an investor who has contracted to purchase 6 properties off the plan for $300,000 each and the building is scheduled for completion 18 months from now. Despite what the seminar marketeer told you about the huge profits you would enjoy by the time of settlement, you find that the market has peaked and that an oversupply of properties is forecast by the time you need to settle.
As you might imagine, your banker also reads the press and is aware of the oversupply situation. At the same time, other developers and investors find themselves in the same boat and are trying to cut their losses before it’s too late. Whereas you thought your properties would be worth at least $350,000 each by the time of settlement, and that you would have plenty of equity in the properties by then, you now find that because of the oversupply situation, your banker is only prepared to value your properties at $280,000 each in this depressed market. This is despite the fact that at the time the properties were sold off the plan, a valuer stated that they were worth $300,000.
Where does that leave you if you are a highly leveraged ‘investor’?
How will you meet the shortfall in equity if the bank values the property at less than the contract price?
When properties are in oversupply, the tenants benefit too. They can now pick and choose and as a result, rents decline to meet the market. Landlords offer rent-free periods and inducements just to get a tenant, particularly if the property is at the high end of the market since these are always the first to suffer in a downturn.
As rents decrease, the investor’s cash flow is strained by interest costs and other outgoings affecting the investor’s ability to hang on to the investment (even if interest rates stay the same!)
With no short-term prospect of a capital gain, cash strapped and disillusioned novice investors generally end up selling out at a loss. This is when the professional investor has a field day by making silly offers and picking up the bargains.
Which type of investor are you?
About Hans Jakobi
Hans Jakobi is an educator, author and investor. He is the author of six best-selling books including,
How To Be Rich & Happy On Your Income which is available at:
www.supersecrets.com and the presenter of the Super Secrets® to Wealth do-it-yourself real estate home study course. Join Hans Jakobi’s FREE Super Secrets® Online Newsletter
© 2002 Hans Jakobi. All rights reserved worldwide
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