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I saw some infomercial with Than Merrill, a businessman, which claimed that anyone can, and I quote, "Invest in real estate and reap big money -- even without using a penny of your own cash."

I know this is broad, but this isn't a scam -- it's a workshop/educational thing about teaching people of investing in the real estate market, and how to profit. Some people's testimonials show investments with little (< 1K) to no money (absolute $0), and they have managed to "flip" real property and make tons of profit without much investment quantity. I'd like to know more about this with real estate.

How do you invest small or, as quoted, "no money" in to real estate and make profits/flip?

What are the basics on this? I've looked into "investing in real estate" on Google, but they only list crappy investment channels with 4-9% annual returns. The infomercial I saw was about "flipping" and putting money in to buy and quickly re-sell and turn profits in the short-term. Anyone know of this?

  • 13
    Some quick googling will answer your question for you: google.com/search?q=Than+Merrill+scam – R.. Dec 15 '16 at 3:50
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    Scams and investing workshops are not mutually exclusive categories. – BrenBarn Dec 15 '16 at 5:17
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    Using credit isn't technically your money. That's one way these types of investment courses (read "scams") encourage to get started. – BruceWayne Dec 15 '16 at 6:20
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    Read your title out loud until it you realize that it does not make sense. Then you will have your answer. – Pete B. Dec 15 '16 at 14:58
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    Well if your question is How do you invest in real estate without using money? then it sounds like Than Merrill has the answer. You should absolutely attend his non-scam workshop and then you should be able to aptly share this information with the rest of us. I will favorite this question so that I can await your answer to this question. – MonkeyZeus Dec 15 '16 at 15:10
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I know this is broad, but this isn't a scam -- it's a workshop/educational thing about teaching people of investing in the real estate market, and how to profit

The scam is that the free or cheap class doesn't give you enough info to make money; so they sell you a more advanced and expensive class that gets you almost enough info; but the goal of the 2nd class is to get you to pay for the specialized seminar and coaching sessions that either fail to materialize or are so basic they aren't worth the money.

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    Presumably once you pay for all the classes, you discover that the way to make money in Real Estate without spending any of your own is to hold classes on making money in Real Estate... – T.E.D. Dec 16 '16 at 5:30
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    @T.E.D. Then you can buy the next set of lessons on how to teach making money in Real Estate! – jpmc26 Dec 16 '16 at 9:05
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    @T.E.D. so they're basically following the blueprint of some (most?) colleges and universities – coburne Dec 16 '16 at 14:23
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    Exactly. They also sell your information like cell phone number to advertiser. I know this because... uhm... a friend. – the_lotus Dec 16 '16 at 15:07
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    @coburne Except that colleges and universities actually need to maintain a positive reputation over a long period of time, though. They don't tend to be fly-by-night type operations. If you're willing to take some time to do some research before you start, it's not that hard to figure out whether a given degree will probably be worthwhile for you or not. The trick is that you have to look at it objectively, not with the "Oh, I underwater basket weaving sounds like fun! Let me pay $40k/yr to get a degree in it, then I'll definitely have a good job after graduation!" attitude. – reirab Dec 17 '16 at 8:23
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Sounds like the seminar is about using OPM (other people's money), which means you're going to have to find not just real estate, but investors. Those investors are going to need a business plan, contracts, and a lot of work from you to provide as much equity as possible before the property is sold. If you're serious about Real Estate, I suggest finding the most successful broker/agent you can, buying them a beer, glass of wine, or cup of coffee, and picking their brain about it. It'll be cheaper then a scam seminar.

24

This is one way in which the scheme could work:

  1. You put your own property (home, car, piece of land) as a collateral and get a loan from a bank. You can also try to use the purchased property as security, but it may be difficult to get 100% loan-to-value.

  2. You use the money to buy a property that you expect will rise in value and/or provide rent income that is larger than the mortgage payment. Doing some renovations can help the value rise.

  3. You sell the property, pay back the loan and get the profits. If you are fast, you might be able to do this even before the first mortgage payment is due.

So yeah, $0 of your own cash invested. But if the property doesn't rise in value, you may end up losing the collateral.

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    Point number two is incorrect. You use the money to purchase a property that generates cash flow (read rents for more than it costs) or a property that you can quickly force appreciation and resell (read flip) – JaredStroeb Dec 15 '16 at 21:10
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    @JaredStroeb Point number one is also wrong. You use the property you're buying as security for the loan, not your own personal residence. If you can't find a bank that's willing to issue a mortgage to you for that piece of property then most likely either you have a bad credit history or the property isn't actually worth what you're planning to pay for it (or both.) – reirab Dec 17 '16 at 8:06
  • @JaredStroeb, reirab: Thanks for comments, I've updated my answer. – jpa Dec 17 '16 at 9:41
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    Point 3 is virtually impossible outside an incredible bull market. – Stephen Dec 19 '16 at 2:05
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They're probably talking about flipping houses. The conventional wisdom when flipping is to purchase the property with a mortgage or other loan on day-0. Do the work to rehabilitate it. Get it listed for re-sale promptly (this step has varying strategies) with a profitable price but one that will make it move. Have the house sold on or before the first payment would be due. This is anywhere from 30 to 60 days.

The flipper then never has to make a payment on the mortgage or loan, the costs of rehabilitating the home are recovered promptly (potentially before any loan, credit card payments, or invoices are due), and there is a profit. This also assumes that either a 100% loan or some other mechanism is used to address closing costs and fees.

This model fits the premise of the infomercial in that you make money investing in real estate but never have to tie up any of your own money in the process.

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    You actually have a little longer than 30 days (mortgages are paid in arrears, so if you time it right and close on the 2nd of the month or something you'd have about two months until the payment is due). – Joe Dec 15 '16 at 15:37
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    I have heard the adds, and this is what is advocated. The catch is that if you can't turn the property over in the allotted time, you are on the hook for the mortgage payment and contractor bills involved in the renovations. If you don't have the money to make the payments, then the bank will end up with your "investment", the contractor will have a lien against you, and you will have a lovely black mark on your credit report. If you posted your own home, or other property, as collateral, then it is at risk of ending up belonging to the bank too. – Rozwel Dec 15 '16 at 20:15
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    In addition to what Rozwel said, the odds of being able to complete the renovations and close on a sale of the property within 60 days from when you closed on the purchase are not great in most markets. Maybe that works in some high-demand markets, but I wouldn't personally recommend trying this unless you're in a position where you're confident that you'd be able to make payments on the property for a while if it didn't sell quickly (and you're also sure that the property is actually worth what you're planning to sell it for and you're not just participating in a housing bubble.) – reirab Dec 17 '16 at 8:12
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I've been to one of these seminars:

a) you can get a loan of up to $700,000 from the company and only have to pay a fixed amount for the use of money, but you have to pay the loan off in nine months.

Or b) you can just invest say $50,000 and you'll get a return of say 4%.

But what the company does is take all of the investor's money and use that to fund the loans (putting none of the company’s money at risk), and that fixed amout sounds reasonable until you realize that it's only for a part of the year so the real APY is actually much higher than the conventional lending rate; or the rate they are paying the investors.

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    Also, depending on the details of how the scheme is set up, if you take option (b), you could be out some or all of that $50k if some of the people taking out the loans default on them. This is not exactly your typical AAA-quality bond investment... – reirab Dec 17 '16 at 8:16
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There is (almost) always money involved somewhere, but it doesn't have to come from you. It can be investors, credit cards, or even seller-financing (I've done all 3).

Examples:

  1. If you can find partners with the money to make the deals happen, then your job is to put the deal together. Find the properties, negotiate the price, even get the property under contract (all without any obligation or cost on your part... yes it absolutely can be done). Then your partners will fund the deal if it's good enough and their terms are met, etc.

  2. In some areas you can put a property on a credit card. If you find a house say for $25,000 that will rent for $300/month, and you can put it on a credit card (especially at zero percent for a year or something similar), then you can generate cashflow as a landlord without putting up any cash of your own on the purchase. Of course there are many risks associated with landlording and i could tell you horror stories... but we're not addressing that here.

  3. You can negotiate a sale with an owner who agrees to finance the entire purchase for you. I once purchased 3 properties at once this way from a seller who financed the entire sale, all closing costs, everything, this way. Of course they needed a lot of repair and such so I had to fund that another way, but at least the purchase itself cost me no money out of pocket.

So these infomercials/courses are not inherently scams in the sense that what they are teaching is (usually... I'm sure there are exceptions) true. However they generally give you enough information to get into trouble, and not out. But that's what true learning is... it's getting into trouble and finding a way out that doesn't kill you. =) That's called experience, and you can't buy that for any price.

  • that is interesting about putting a property on a credit card. You write that this is possible in some areas. Would you mind sharing other information about where this would be possible? – coderworks Dec 19 '16 at 4:53
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    Well this was years ago (around 2005-2006 as I recall) but at that time I saw credit-cardable houses in places like Buffalo NY, Detroit MI, and parts of TN. I purchased at least one in TN, maybe two... was so long ago. Keep in mind that generally if you're buying a $25k house, it's in a very "depressed" area, and can have many risks associated with that. But if you can handle the risk, there can be a commensurate reward on the other side. Just be prepared for things to not go your way and handle them accordingly. – Jonathan van Clute Dec 19 '16 at 19:13
  • cool, thx Jonathan – coderworks Dec 19 '16 at 19:53
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I have a friend who had went on a seminar with FortuneBuilders (the company that has Than Merrill as CEO). He told me that one of the things taught in that seminar was how to find funding for the property that you want to flip.

One of the things he mentioned was that there are so-called "hard money" lenders who are willing to lend you the money for the property in exchange for getting their name on the property title.

Last time I checked it looked like here in Florida we had at least Bridgewell Capital and Fairview Commercial Lending that were in that business.

These hard money lenders get their investment back when the house is sold. So there is some underlying expectation that the house can be sold with some profit (to reimburse both the lender and you for your work).

That friend of mine did tell me that he had flipped a house once but that he did not receive the funding to that from a lender but from an in-law, however it was through a similar arrangement.

  • "Hard money" just means it is money secured solely by a "hard asset" i.e. the property, and not your credit. It is not always true that they strictly "get their investment back when the house is sold", generally there are extremely high interest rates along with an equity ownership. Last time I checked years ago, hard money rates were between 10% and 15% APR. Definitely not something you want to use for any length of time, but they can be very helpful as a short term bridge between conventional financing. – Jonathan van Clute Dec 19 '16 at 19:16
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Well, the seminars are not exactly a scam but they can be misleading. They hold x number of seminars a year with 100+ people in them. 1 or 2 people manage to put a deal together and they hold those few people up to show that the seminar works.

Here is how the no money out of your pocket real estate deals work (in broad strokes).

  1. You find a property for pennies on the dollar.
  2. You get other people to give you the money to buy and fix up the property (it will surely need fixing if it is pennies on the dollar).
  3. After fixing it you flip it (sell fast) or rent it out.

Here are the issues with that:

  1. If the property is for sale for pennies on the dollar, there will be issues with the property. Do you know enough to know if it will cost less to fix those issues than you are saving on the purchase price or cost more? Many sellers and most realtors know what they are doing so actual deals will be few.
  2. Who will invest their money with someone green? Many seminars teach you to present yourself as someone who has a lot of experience; turning you into the con man.
  3. Do you know how to fix the property properly and inexpensively? Many contractors can smell a sucker. Do you know enough to make sure the contractor does what they say they will? Do you know how to sell or manage the renters for the property?

Also, here is the general pattern for free seminars:

FREE: Why? Why invest your time and money this way? Why trust this person or group to teach you properly? If this system works so well, why are they wasting their time giving a seminar? (that last one is just my commentary)

$100-$300: What? What are the steps that you need to do to a accomplish the task? They give you enough info here to let you know just how much you need to learn to get the job done.

$300-$10,000: How? This is where they actually give you the information on how to actually perform the steps they outlined above.

$????: Tools, coaches/mentors, offers to do most of the work for you, etc. They trot these out once they show you how much work you will actually be doing and your brain goes into overload from all the stuff they taught you that you may or may not be able to remember. This is where most of their success stories come from.

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protected by Chris W. Rea Dec 21 '17 at 12:01

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