Robert Abalos is the author of Investing in Land, the most widely sold real estate book in publishing history with sales in more than 91 countries around the world. This blog offers news and advice for real estate investors and land developers.
On March 21, 2011, the Court of Appeals of Washington State entered a decision against Joseph Kaiser, the get-rich-quick creative real estate guru, affirming a lower court opinion to ban him from the real estate business for life in the state. Kaiser had been convicted of 300 counts of foreclosure rescue fraud by the Washington State Attorney General in connection with his investment activities near his home of Tacoma, WA and ordered to repay nearly $3.2 million in restitution.
I urge all real estate investors and especially anyone thinking about buying a "Get Rich Quick in Real Estate" home study course or seminar ticket to read the Court's decision in State of Washington v. Joseph M. Kaiser, Here is a link to the case, ironically from Kaiser's own website!
The Court details how Kaiser's "schemes" (the judge's actual words) worked in great detail. This is an impressive document explaining how some of the get-rich-quick gurus operate in the real world and what they teach to their students. See with your own eyes how these "sure thing" deals work and how law enforcement and the courts treat their real estate ideas.
The sheer audacity of some of Kaiser's transactions offended the judges and that is why they mention some choice examples.
In one case, Kaiser paid a couple $500 to sign a quitclaim deed. Days later, he pocked a whopping $37,994. In other transaction, $200 got $16,665. In both deals the court states Kaiser lied to the homeowners about his intention to make overdue property tax payments. That's the catch. He made big money by trickery, not shrewd investment.
I have often said that the real estate get-rich-quick gurus often teach nothing but foreclosure rescue fraud. They teach students how to STEAL real estate, not invest in it. This case is just more proof I'm right.
In 2005, the National Consumer Law Center released a report called "Foreclosed Dreams" investigating how foreclosure fraud scams work. This NCLC report reads virtually like a primer of many get-rich-quick real estate courses, even down to the words the gurus use on their bandit signs. Some gurus were even named and their "investment techniques" featured this report. "Foreclosed Dreams" went on to become influential in many state decisions to reform their foreclosure laws as it was cited by advocates seeking consumer protection law changes.
This Washington State Court of Appeals case could have the same impact over time. None of the techniques used by Kaiser on desperate homeowners should be legal. If your state allows them, send your legislators a copy of this opinion and ask them to change the law.
I'll give Joe Kaiser credit for one thing. He was an active real estate investor, just a crooked one. He really did buy and sell homes, even if he only barely legally owned them. This one simple fact sets him apart from many other gurus that never buy a single teaspoon of dirt or build a treehouse and call themselves real estate experts and master developers.
Your job is either gone or at risk. Maybe your kids had to move back home because they can't find a job after spending $50,000 for a college degree.
Inflation has returned to energy, food, and nearly all commodities.
Two bubble markets in less than ten years have crushed your 401(k) and your retirement savings.
So get ready for another shock. Increasing property taxes.
Virtually everywhere I look I see legislatures and city councils getting ready to hit homeowners and rental property investors with a host of new taxes and fees.
The government is broke, and perhaps lonely, so it feels you should be broke too.
Here are just two examples I found in about four seconds. I read about sixteen others.
Palm Beach, Florida: Tax rate rising to maximum allowed by state law, $10 per $1,000 valuation
In my city of Seattle, a new rental property inspection and licensing program is being launched in 2012. The goal is to protect tenants from all those evil landlords who rent unsafe apartments to tenants much too dumb to think of moving from a filthy or dangerous place. The fees? So far I haven't seen them announced anywhere but the "program will pay for itself."
In other words, rental property owners get poorer while the city gets more money from them.
The idea of taking yet more money from taxpayers and property owners is revolting.
To do it in the midst of the worst real estate market since 1931 is downright mean.
If government cannot live within it's means, then it must do what every other entity faced with this challenge must do. CUT EXPENSES.
Until this happens, God pity the real estate investor for they have the only deep pockets that cannot be put on a truck and moved out of town.
I read a large number of business biographies every year. Most either dwell on the mundane and intricate details of a titan's business machinations in excruciating detail while others offer a few tips on how a mogul made their money but focus more on how they spent it.
Occasionally, a book comes along with the perfect mix of both numbers and advice.
Hellman literally built the modern city of Los Angeles, transforming a sleepy and largely ignored town miles away from the booming San Francisco into one of the most important cities in the world.
The enormous wealth and power of this one man was staggering, especially when you realize he came to the United States with virtually nothing.
Hellman started and owned many banks, the most famous of which is today Wells Fargo.
He built trolley and railroad lines, prospected and discovered huge deposits of oil, and was a large investor in the Los Angeles Times newspaper. Hellman built the Wilshire Boulevard Temple, the first Jewish synagogue in Los Angeles, as well as starting the University of Southern California, eventually serving as Regent for the University of California.
His ambition and drive seem to know few limits. For nearly twenty years, Hellman owned and controlled nearly the entire wine industry of California. After the 1906 San Francisco earthquake, he provided not just the capital for rebuilding the city but also calmed the world markets about the calamity.
Author Frances Dinkelspiel writes with mastery, walking the fine line between too much detail and not enough with great precision. I loved this book so much after reading a library copy I bought one for myself.
Any real estate investor or developer who cannot learn two dozen money-making tricks from this book is not trying hard enough. I cannot wait to read more from Ms. Dinkelspiel.
This book gets an enthusiastic recommendation from me. Business biographies just do not get any better than this one. This is a MUST READ BOOK!
Lately I have been getting a steady stream of inquiries from people asking me for information about Seattle real estate developer Michael R. Mastro. I wrote about him in this blog in July 2010.
Mastro has been a Seattle developer legend for decades and very well known for his projects. But when the market tanked in 2007, Mastro like many others could not pay his bills. He eventually filed for bankruptcy leaving $325 million of unpaid debts. This is one of the largest bankruptcy filings in the history of Washington State.
The irony, noted by this reporter at the Seattle Times, is that if the banks that forced Mastro into bankruptcy had waited just a bit longer these impatient lenders might have recouped most or all of their money.
Mastro and his wife Linda were ordered to turn over two giant diamond rings worth $1.4 million to the court to satisfy creditors and they didn't. In fact, they left town when asked for the ice.
This case is so sad because Mastro is a talented real estate developer. At the age of 86 he should be working on his magnum opus, the last great project of his storied career. Instead, we read each day about his mysterious disappearance and all the creditors he has left behind.
Get-rich-quick real estate gurus like to claim that they have all the answers. But in reality their advice is literally a legal mine field of half-truths and quarter lies. Few buyers who are dumb enough to try some of the techniques used in these high priced courses and seminars will remain unscathed for long.
This is the very reason why most get-rich-quick real estate gurus also sell Asset Protection Courses on avoiding lawsuits and court judgments.
Get the relationship between the two?
I recently reviewed a "Get Rich in Short Sale" home study course by a relatively famous real estate guru. Numerous opportunities which they characterized as "profit centers" in my opinion were nothing short of fraudulent activities.
One of them involved the flipping of short sale properties by failing to make EXPRESS disclosures to lenders. They believed IMPLICIT disclosures or inferences were enough to satisfy the legal requirements.
Sorry.
Here is what happens when that is tried in the real world. It involves a trip to U.S. District Court as a criminal defendant. What is important is that the VERY SAME ACTIVITY detailed in the guru's home study course was used by this real estate agent facing Federal jail time.
Can you REALLY make money in short sales? Sure, of course, but it is NOT NOT NOT as the gurus with their slick haircuts and shiny shoes contend. Speak to genuine real estate agents who specialize in short sales or investors who make a living in the area. It is LOTS of hard work and even then many decent deals fall through for no reason other than bank capriciousness.
The bottom line here is simple.
The more a real estate course screams EASY MONEY or FAST PROFITS, the faster you need to close your wallet and run away.
For the record, I am not naming the guru or their course because they asked my opinion privately and I agreed to give it. That said, this warning is a general one and applies to many short sale courses, not just one in particular, and this guru knows exactly how I feel.
Watch this ABC interview with Treasury Secretary Geithner from this morning and count how many times he uses the Orwellian euphemism for tax increase.
"Tax reform to generate additional revenue."
America, that is called a TAX INCREASE.
Think only millionaires and billionaires are going to be taxed? Think again. One of those nasty tax loopholes of the rich that may be reformed away is the ordinary mortgage interest deduction.
Here is one tax almost certainly on the table. TWO new taxes on airline tickets. $27.50 new taxes per ticket on the OUTRAGEOUS number of taxes you already pay.
$63. That is a 21% sales tax when you want to fly. Get ready to cough up some more dough when you want to travel because the government has decided that the best way to control excessive spending is to give the government more tax money to spend.
Oh, I'm sorry. Do tax reform to generate additional revenue.
The current hotel room tax rate is 15.6%. The tax on rental cars in Seattle is 18.6%.
So why are these rates NEARLY DOUBLE the current Seattle 9.5% sales tax rate, the one city residents pay every day when they buy things?
It is called "taxation without representation." Our Founding Fathers in 1776 talked a great deal about it. Perhaps the Seattle City Council could break out a copy of the Federalist Papers and learn something new. As James Otis, a good friend of Thomas Paine during the American Revolution, reminded us, "Taxation without representation is tyranny."
Well, not in Seattle I guess.
Taxing visitors to a city is easy for politicians. People who do not live in Seattle cannot vote in local races so there is no chance of retaliation at the polls for the excessive taxes. Such a policy might make sense in a childlike way but this unfairness just invites tax retaliation from other jurisdictions who will tax Seattle residents when they visit other places.
The idea of encouraging new tourists by increasing the taxes and costs on their visits is as dumb as it sounds. If a $2 per night hotel tax will bring in new tourists, why not raise the tax to $20 per night and bring in ten times as many visitors?
If you visit Seattle and stay in a $200 per night hotel room for five days and have a $50 per day rental car with you as well you pay more than $200 in taxes to the city of Seattle alone during your stay.
And of course nearly 10% on everything else you buy too. Plus another 10% a day for the parking spot for that rental car.
With so much financial encouragement like this, I'm sure a tidal wave of new tourists can't wait to visit the city. Who doesn't like being taxed at nearly 20% rates?
The idea of promoting PRIVATE places like hotels and tourist attractions with PUBLIC money is deeply offensive. If the downtown hotels, amusement parks, and sightseeing destinations want to promote their locations, let them pay for it. These corporations and LLCs will reap the financial rewards. Why ask tourists from Omaha, Peoria, Spokane, and Detroit to pay their public relations and advertising budgets?
The effect of all these sales taxes on hotel valuations and cap rates will be discussed in a future article. These real estate investors are the real losers here.
While such threats have always been implicit in such bargaining it is rare that I have seen the promise of state action so transparently celebrated by city officials.
This trend is DANGEROUS. Who knows best how to develop land and actually make a profit? Politicians (elected and appointed) or real estate developers?
The cancellation rate rose from a normal 4% to a whopping 16% in just one month.
A 400% rise in contract cancellations is pristine evidence that the problems of the U.S. residential real estate sector are far from over. In fact, they are, if anything, getting worse.
It has been said that the U.S. has a "buyer's market" for housing. REALLY? Sounds like many buyers are still overpaying for houses but the banks this time are catching many from making yet another unsound purchase.
I recommended buying gold to the readers of my Investing in Land email newsletter in 2005 at $420. Here is a ten-year gold chart and where I priced in for my subscribers.
Other real estate authors in 2005 were enthusiastically recommending that flipping properties or lease/options were the tickets to wealth. Sorry how that turned out. Or in the end who was right then and who is still right now.
It would not surprise me if gold hits $2,000 per ounce in the years ahead. The bullish case for gold is overwhelming because the fundamentals are so strong.
I call this move secret because the project was started without all the usual fanfare. Seattle media, especially the local TV outlets, discovered the existence of this new public works project and City Hall quickly reacted to explain all the new construction. Here is an excellent KOMO-4 TV report on the new project.
The idea is to "reclaim" The Jungle for Seattle by giving local residents in the besieged bordering neighborhood of Beacon Hill a chance to use the land for recreational use. If the public begins to use The Jungle, then the small army of criminals that use the place as a base for their drug, prostitution, and other crimes will be chased away.
Nice idea, but it won't work.
The bike trail as being constructed merely underscores the danger of The Jungle. The bike trail will wind through The Jungle fenced in on both sides by two ten-foot parallel chain link fences capped by twelve foot lights. In other words, a path has been cleared through The Jungle but bicyclists and hikers on the trail have just a fence and some lights as protection against the criminals lurking just feet away in the dense underbrush.
When I first heard the project described, it reminded me of the old fortifications on the Berlin Wall. Compare this photo with what I just described above. Ignore the guard towers and take away the barbed wire and you have the proposed bike trail through The Jungle. Looks lovely, very peaceful, eh?
Few people will ever use this bike trail, especially at night when the real character of The Jungle gets menacing. I suspect that within a few weeks of the project's completion the fence will have a thousand holes cut through it by Jungle residents who get tired of walking around it and the copper wiring from the lights will be stolen. It happens in Seattle all the time, maybe by the same residents of The Jungle the city hopes to displace.
Would you walk through a park at night with chain link fences on either side protecting you from what lies just inches away in the shadows? The Seattle Police frequently find dead bodies in The Jungle. Who wants to be the next one on the coroner's slab?
So how much is this new bike trail going to cost Seattle taxpayers? The normal ebullient Mayor is tight lipped on this project. Even the media sources reporting the new bike path are not quoting estimates, just the sources of the funding.
The best guess I can come up with is a 2010 estimate costing the project at $3.4 million. Knowing the way Seattle public works projects come to fruition, the current budget must be $5 million with more cost overruns certain.
The problem with The Jungle is not its location or its geography. The issue is the dense underbrush that permits extensive homeless and criminal activity at the site. You literally cannot see five feet in front of you in places. The solution is obvious. CLEAR THE BRUSH and DEVELOP THE SITE. The area has both genuine recreation and commercial uses but not when dozens of acres of good land are covered with weeds and shrubs, none of which are worth preserving.
Such a clearing solution would anger the homeless advocates in the city. Just hauling away the TONS OF DEBRIS left behind by homeless (and dead) men and women causes an outcry over public "fascism" and insensitivity. Such protest on City Hall are frequent and extremely vocal.
Someone recently stole Mayor McShwinn's bicycle while he was at his office in City Hall. This criminal act speaks volumes about why people are not EVER going to commute to downtown Seattle in large numbers, especially in a city where there is little else but many big hills and constant rain. If the Mayor cannot park his bike downtown without risking theft, can you?
The City of Seattle today announced that it is selling one of its transportation storage yards to the State of Washington for nearly $20 million. Here is the actual street location.
Both the city and the state are broke so this is typical of the accounting games they are playing in order to balance their budgets. I wouldn't be surprised if next year the state sold it back to the city and tried to book a profit.
But one of this storage yard sale provisions is that the funds, $19.6 million to be precise, can only be used for "transportation purposes."
Mayor Mike "McSchwinn" as he is called by critics, needs to understand that the quality of everyday life in Seattle is quickly deteriorating and the lack of expensive and artsy bike trails is not the reason.
Crime is the culprit. Specifically, the petty criminal acts caused by the so-called "homeless" population of Seattle that range from car theft, assaults, prostitution, drug trafficking, and more.
Tourists visiting Seattle get to see not only murders and attempted homicides right outside their hotel doors but also can take in all the new homeless encampments springing up everywhere around the city. Here is one such camp just four blocks from the mayor's office in City Hall. This collection of garbage that meth addicts and alcoholics call a "home" stinks of urine, feces, and rotting trash even from a distance.
So today we learn that Seattle has received a $20 million windfall and will spend part of the sum filling potholes at $600 each.
I bet within the next few weeks the mayor will announce a new bike path initiative for the rest.
Residents of Seattle, like me, are waiting for someone to come to the defense of civilization.
The former "Flip This House" TV guru Armando Montelongo has been besieging Seattle the last few weeks with endless repetitions of his infomercial for his "Mega Millionaire Round Table" events.
His ads actually began to appear on my own website here via Google's Adsense.
So I decided to check out one of his events held in Bellevue, Washington.
As usual, I was surprised how many people turn out for these get-rich-quick real estate seminars. In this case, there were nearly one hundred people in the middle of a Wednesday afternoon. The crowd looked like your typical infomercial target audience, more blue collar than white.
Armando himself was not at the event in person. Instead, a presenter that I would describe as too slick by half attempted to use every old trick in the book to get people to sign up for a three-day $900 seminar.
First, what I call "The Guilt Trips." Make people feel bad about themselves for being financially stressed. This technique works very well with men, the traditional breadwinners of the family.
"Don't you want to be rich? Why don't you try harder?"
"Invest in yourself. No one else will."
"When you are successful your family will respect you. Your community will respect you."
"Are you going to let your children down when they need help going to college?"
Then comes the sales pitches, what I call "The Bait."
"Would you like to earn more money in one month than you did all last year?"
"Armando is not smarter than you. He just has a system that you don't."
"You can make $20,000 without a boss, a timecard, or even getting out of bed."
Inevitably, comes "The Hook" or the actual sales offering, in this case a $900 three-day workshop. Unfortunately, I saw about a dozen people actually sign up for it.
What I gathered at the event, Armando teaches a mixture of using hard money loans to buy property and all the classic property flipper techniques, NONE OF WHICH work in the real world like the gurus describe in their courses. From a substance standpoint, I heard nothing new. I also know that despite the claims of his infomercial, no substantive advice was shared at this event. In other words, if you went to this free seminar trying to learn about real estate investing, you got cheated.
I also know that this $900 seminar is really just a sales pitch for Armando's Bus Tour, a major event which has the eye popping price tag of $24,997! Yes, people do actually pay nearly $25,000 to ride around with Armando in a bus looking at properties. Or at least that is what was promised them.
The Internet is filled with complaints about Armando Montelongo and his poor sales practices. I don't believe much of what I read online about the real estate gurus since (1) many of the good testimonials are put there by the gurus themselves or their shills and (2) much of the bad testimonials are posted by competitors seeking to damage each other. So I discount 99% of what I read online and don't believe the rest.
But I do believe my own eyes.
At least with respect to the one event I attended this week, this is the worst real estate program I have attended in years. The Armando's Mega Millionaire Round Table makes Robert Kiyosaki's Tigrent programs look like a paragon of virtue. There were so many get-rich-quick guru stereotypes built into this one ninety minute session that the entire presentation bordered on self-parody.
Think Dan Aykroyd of Saturday Night Live fame.
I cannot recommend Armando Montelongo's Mega Millionaire Round Table at all. Don't waste your time with it. I have not read his book "Flip and Grow Rich" but I can just imagine what's inside.
This new article is titled "Avoiding Real Estate Guru Fraud: Five Clues that a Course or Seminar is Worthless" and describes five common real estate get-rich-quick guru scams and how not to fall for them.
There are so many real estate gurus these days that it is better to look for telltale signs of shady conduct rather than try to build an encyclopedia of names.
My advice to you is not to buy any real estate home study course, seminar ticket, or any product or service sold using these techniques. There are so many genuine and superb real estate gurus that can actually teach you useful information to waste your time and money on the ridiculously expensive pablum the gurus hawk without conscience.
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