Caveat Emptor!

One of the advantages of being a landlord is that you grow to be extremely skeptical. Tenants lie - early and often. Applicants lie about their background, jobs, and even their names. I have become so cynical that I just assume all rental applicants are lying until proven otherwise (and most of the time, that is correct).

So, when I see an infomercial on TV or some internet guru promoting the fad of the month, it is easy for me to be skeptical. Unfortunately, millions of people are taken in by these scams and lose a lot of money to these gurus.

These past couple of days, I've been feeling a little ill. I'm not quite sure what I've picked up, but many of the tenants have been sick and so I'll blame them!!! (If in doubt, the tenants are always at fault). As a result of feeling bad, I haven't been able to sleep very well. Last night, I found myself wide awake at 3am watching an infomercial about some magic internet program that would surely make you rich for only $40! This post is about the RIDICULOUS claims that this guru made and that many real estate "gurus" make also!

The first thing you'll notice in all these infomercials is that there are beautiful people, beautiful cars, and beautiful houses (mansions) in the commercial. In some extreme examples, they'll even show a private jet or yacht in the infomercial. The obvious implication is that if you only buy the guru's course, you too will have supermodels flocking to your side; you too will have a Ferarri; you too will live in an ocean-front mansion. Of course, this is totally ridiculous as it takes an income in the millions (tens of millions) of dollars to support this lifestyle. However, the guru is trying to portray to you that they are rich and that you too can become rich, if you'll only spend $40!

The next thing you'll notice about all these scams is that the guru claims that you can get rich with only a minimal amount of effort. As I said, the infomercial that I watched early this morning was about an internet business. Ironically, it never said what type of internet business it was. However, they not only claimed that getting rich was effortless, they also claimed that you didn't need to know anything about the computer or the internet. Can you imagine how gullible a person would have to be to believe that they could get rich in a computer based internet business without knowing anything about computers or the internet? Of course, this is ABSOLUTELY RIDICULOUS, but that was the claim. This informercial claimed that the computer did all the work and that you would make money while you slept! Of course, if the guru had really discovered a computer program that would make huge amounts of money without effort, why would the guru sell this secret to you for only $40??? Of course, they would NOT!!!

Another common element that all these scams have in common is that they show customers that have supposedly made a lot of money with the course. My suggestion is to listen CAREFULLY to what they are actually saying. In the infomercial I watched, customer after customer came on and said that they made "up to" $X per month. Of course, when a person says that they made up to $100,000 per month, that really means that they made between ZERO and $100,000 per month. The infomercial is counting on the viewer to hear that they made $100,000 per month. Using that logic, I can honestly tell you right now that I made UP TO $1 BILLION DOLLARS YESTERDAY with my rental property business!!! Get it?

The other issue with claims of great riches is what does the word "made" mean? If I told you that I "made" $10,000 yesterday, does that mean that I'm rich? Not necessarily. You need some more information, and that information is conveniently missing in every infomercial I've ever seen. For example, is that $10,000 gross income or net income? For most people, making $10,000 per day sounds GREAT, but what if I told you that $10,000 was the gross income and that your operating expenses were $9,995 per day? That means that after all was done, you would only have $5 per day to show for your work. Doesn't sound quite so good now, does it? Can expenses really be that high? YOU BET THEY CAN!!! In fact, expenses can be MORE than the income, which is exactly the situation that causes most new businesses to fail.

This post is intended as a warning to new investors. I urge you to listen skeptically to anyone that claims that they will make you rich with little effort or money on your part. There is no free lunch. If you want to be rich, be prepared to work HARD for it. If it sounds too good to be true - IT IS! Caveat Emptor!