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John T. Reed' analysis of Russ Whitney' TV infomercial 4 Bobby Threlkeld in Alabama Bobby says that two weeks after the training he bought a pre-foreclosure for $36,000. It appraised at $77,000. (By whom?) He made $30,000 to $40,000 on that first deal. Two weeks later, he bought two more. Paid $18,000 on the courthouse steps (Sounds more like a foreclosure than a pre-foreclosure) and sold them for $40,000 within 90 days. He sold another property for a $20,000 profit 18 months after he bought it. Made a total of $80,000 on his first four deals. He says his best deal was one where he paid $12,000, it appraised at $120,000 and he pulled out $58,000 on refinance. As above, I would appreciate it if some reader in the Alabama area would track down this guy' deals in the recorders office and send me the papers. But I can make a few comments just from the infomercial comments. The $30,000 to $40,000 he says he made on the first deal was formerly the equity of the person or couple being foreclosed. We are not quite sure of what Bobby "saved" them from. We know it was foreclosure, but we do not know how much better off their credit is"”after all, they were behind in their payments and that will still show up on their credit rating. But we can be sure of what he says he charged them for his "savior" services: $30,000 to $40,000. Best guess: Their net worth before Bobby "saved" them was about $35,000 to $45,000; after, $5,000. In general, I would characterize that as a heck of a first deal for a guy with two weeks of experience. From what I understand, people who are being foreclosed are bombarded by pre-foreclosure investors trying to get their equity. How Threlkeld beat out all those far more experienced guys and got this superbargain in spite of competition that is usually willing to settle for a far smaller profit on his first try is a question I would like to answer. Two weeks later, he goes to a different niche"”foreclosure auctions"”which require all cash in many states"”and again beats out the pros who have been doing this every week for decades. What a guy! Most investors either do pre-foreclosures or foreclosure auctions, but not both. They require different personalities, cash available, title search capabilities, and so forth. But not Bobby. He can do either better than the pros"”and in only four weeks! What a guy! What training! But the topper is buying a $120,000 property for $12,000! He doesn"t say how. I would sure like to know. That' a 90% discount. I have written about actual case histories of similar discounts, but they were really weird situations"”like an ancient sheriff' deed found in a drawer when a guy bought an auto-repair business, some tenant-in-common interests, and some judgment deals. See my books on How to Buy Real Estate for at Least 20% Below Market Value for details. But as far as I know, Whitney is not teaching those techniques. He just teaches "motivated sellers," cosmetic rehab, converting houses to rooming houses, and such. Lest you miss my meaning, I am really skeptical about Mr. Threlkeld' deals. Alabamans, please Roll Tide and dig up his deal documents for me. "$100K in loan money even with bad credit" The narrator says you will learn "how to receive $100,000 in loan money even with bad credit." I have often observed that the nothing down creative finance movement techniques all fall into two categories: "¢ misleading an institutional lender, like a bank or "¢ taking advantage of an unsophisticated seller. Misleading an institutional lender is a felony. See my article on Whitney' property improvement loan techniques for details. But, if you have bad credit, you probably cannot try the felony route because banks will check your credit, find your bad credit, and tell you not to let the door hit you in the butt on your way out. So we must be getting up to $100,000 in loan money from an unsophisticated seller"”typically seniors who have paid off their home and own it free and clear. Such persons, of course, are the only ones ignorant enough of sound lending practices to do such an idiotic thing as lend $100,000 to a guy with bad credit. Is it legal to persuade seniors to make such a loan? Probably not. In Texas, for example, it would probably violate their Deceptive Trade Practices Act (Texas Business and Commerce Code Section

17.45) because it causes an unsophisticated person to exchange something of value"”the equity in their home"”for something of much lesser value"”an IOU signed by a guy with bad credit. And why is the narrator saying "up to $100,000?" Is there a law that sets a $100,000 limit to making loans to people with bad credit? Nah. It' another number they pulled out of the air because it sounds both plausible and attractive. It ain"t plausible if you know anything about finance. And it ain"t even desirable unless you are going to stick with your bad credit habits and not pay it back. If you start behaving, you have to pay the darned $100,000 back, plus interest. That' only attractive if you can invest the $100,000 in something that pays more return than the interest you have to pay on the loan. Otherwise, you will lose money on the loan. Talking about borrowing large sums of money as if it were equivalent to winning the lottery is a sign of poor understanding of finance, or that the speaker figures the audience to whom he is speaking has a poor understanding of finance. Would someone please tell me how Whitney' instructors say to accomplish this. "Establish $60,000 line of credit in 30 days" Again, these are two numbers picked out of thin air for their combination of attractiveness and plausibility. Why not $50,000 or $75,000? Why not 15 days or 60 days? Can this be done? Sure, if you have enough income and credit. Probably would not take 30 days because of FICO scores and such. Do you need Russ Whitney to tell you how to do this? Heck no! Just fill out a loan application. Suppose you don"t have much income or your credit is bad or both? Then you will not get approved for the line of credit. Can Whitney or anyone else teach you tricks for getting approved in spite of these handicaps? No. You might be able to increase the line of credit you are eligible for by around 5% or so if you knew every trick in the book, made sure your credit report was accurate, knew how to word stuff on the app, and so forth. But the only way a guy with low income and/or poor credit is going to get approved for such a line of credit is to mislead the bank, which as I"ve said, is a felony. I would appreciate it if attendees would tell me how Whitney' instructors tell you to accomplish this. Borrowing your own money A reader responded that he attended a Whitney "free training" and he thinks the $60,000 line of credit worked like this. 1. Deposit $1,000 into savings account at Bank A. 2. Ask for $1,000 loan secured by that savings account from Bank A. 3. Deposit the $1,000 borrowed from Bank A into savings account at Bank B. 4. Ask for $1,000 loan secured by savings account from Bank B. 5. Continue doing this until you have five such loans. 6. Use the fifth such loan to pay off the first at Bank A then ask Bank A to lend you $1,000 unsecured. Presumably they will do this because they are so impressed with your paying off the original secured loan. Anyway, you keep doing this sort of thing until you have $60,000 of unsecured loans. Will this work? Absolutely not. It is nutty, dishonest, and about 30 years out of date. Worked during the Truman administration The notion that this would work stems from an era before Russ Whitney was born. Back in the days depicted in the 1946 movie It' a Wonderful Life, bank loan officers held their jobs for life. As you may recall, in that movie, Jimmy Stewart played "George Bailey," the president of a small town Building and Loan Association. They made their decisions based on knowing the borrower personally. Borrowing small amounts and paying them off were a sensible way to establish credit. Also, back then, $1,000 was a lot of money"”$9,435 in 2003 dollars. Even then, this technique was unethical, immoral, and arguably illegal. It is akin to a check-kiting scheme. Obviously, it depends on each lender erroneously thinking they are the only ones lending to you. But back then, you might get away with it because the lenders would not know otherwise. Then something called a credit report was invented. Initially, it recorded payment history on installment debt. With Whitney' technique, that meant the five lenders would eventually find out about each other when they checked your credit report a year or so down the line. Inquiries, too Then they improved credit reports to start adding inquiries. That is, whenever any prospective creditor inquired about your credit, it was reported to all other inquirers. Why? Precisely to stop the sort of simultaneous borrowing Whitney is advocating. So now, if you go into five banks in rapid succession and try to borrow or arrange lines of credit, they will each run a credit check, see the inquiries of the other banks, and thereby find out the whole story of exactly what you are doing. They will be annoyed, reject you, and tell you not to let the door hit you in the butt on your way out. Far from establishing credit, you will have destroyed your credibility. There is also the issue of stupidity. Why would anyone deposit $1,000, then borrow back their own money and pay interest on it? You would not make an impression on the loan officer as being a good risk. Rather, you make an impression as being an idiot"”or someone who is trying to run some ancient scam they learned at a get-rich-quick seminar. If you said you were doing it to establish credit, the loan officer would explain that in this day of credit reports and credit scores, you establish credit with Bank A by borrowing from any creditor and making the payments on time. $180 a year Then there is the issue of the amount of the loan. How much interest do you suppose a lender gets per year on a $1,000 loan? At 18% it would be 18% x $1,000 = $180"”if you never paid any of it off during the year. That' the gross. Their net would be reduced by the cost of the loan application form you filled out and the time of the employees who processed it. How much employee time can you buy for $180? Not much. There is also the lender' fixed costs like overhead, heat, lighting, etc. In short, bank loan officers don"t have time to screw around with $1,000 loans in the 21st Century. Nowadays, you get a $1,000 loan by obtaining a credit card with a limit of $1,000. The processing of such things is almost all automated, which is the only way it makes sense today. Other lines reduce your credit Finally there is the issue of the amount of unsecured credit you deserve. Each of us qualifies for a certain amount of unsecured credit"”also called a signature loan. If you apply to ten banks, there may be some small variation in how much credit each offers you, but they generally will all offer you the around same amount. How is it determined? By your salary or net income, assets, liabilities, and credit score. Whitney is implying that a person who is eligible only for a $1,000 secured loan can easily qualify for a $60,000 unsecured line of credit simply by playing escalating games with passbook loans. His basic idea is to get to where you qualify for, say, $5,000 in unsecured credit, then simultaneously borrow that amount from twelve different banks. It doesn"t work that way. As I said, nowadays, they will learn about other inquiries when you apply for a line of credit with multiple lenders. They also make you tell them in writing about all your other lines of credit, regardless of whether you are currently borrowing against them. The lender will then calculate how much total unsecured credit they think you qualify for and subtract all your existing lines of credit from that amount. For example, If you qualify for $10,000 in unsecured lines of credit, and you already have a $5,000 line at one bank and a $2,000 line with a credit card, they will give you a line for an additional $3,000, bringing your total lines of credit to $10,000. You absolutely cannot get more lines of credit than you qualify for by simultaneously applying to multiple lenders and not telling each about the others. Arguably, even attempting to do that would be a felony. Whitney is big on dismissing such disclosures as, "The bank doesn"t need to know that." Yes, they do (18 USC 1001) and nowadays they will specifically ask you in writing. You cannot just not mention the other line of credit applications anymore. It would be a felony. Plus, they will force you to make a written statement so you would have to lie, not just not mention it. "Become totally debt free!" Excuse me. You just told us you were going to show us how to borrow up to $100,000 and get a $60,000 line of credit. Now you"re going to tell us how to be debt free. Well, which is it? Is Whitney' target market so profoundly stupid that they think they can borrow $100,000 and be debt free at the same time? That would explain a lot. Telemarketing against you Whitney owns one of those Utah telemarketing companies. I am reliably told that once they get your name and phone number, they have commissioned telephone boiler room salespeople pressure you to sign up for seminars or mentoring. You should record them if they call, but legally you generally need their permission. One guy asked a Whitney telemarketer if he could tape the call and the telemarketer said, "No way!" But if you agree, you get another call from them to confirm your order and they insist on taping that call to prove in court that you agreed. So they are allowed to tape you to prove that they gotcha, but you are not allowed to tape them to prove that they misled you. Suggestion: Tell them that if you cannot tape the sales call, they cannot tape the confirmation call. That' fair, isn"t it? Better yet, hang up on the first call. Fast talkers I am told that the speakers at the "free training" are fast talkers. Well, that would be consistent wouldn"t it? "Fast-talking salesman" is one of those phrases like "get rich quick" that has long described schemes you should avoid. Reportedly, Whitney' "free training" speakers put slides up and pull them down so fast you do not have time to write down what they said. Why wouldn"t they want you to write down what the slides say? As with the telemarketing, the promises you are relying on may not be recorded, but the contract you are asked to sign is quite the opposite. They get you on paper, but you cannot get them on paper. Haven"t heard from a single one This page has been up on my Web site for some time now. Wouldn"t you have thought I would have heard from one or more of these testimonial givers by now. I have not heard from a single one. They were so eager to go on TV to talk about these deals and what great training Russ Whitney provides. But none sends me a copy of a deed or closing statement or a letter or an email or calls. My home phone number is on almost every page of my Web site. For folks who were so willing to talk about their deals on national TV, they"ve become awfully quiet now that someone is going to look into those deals. The infomercial narrator says, "These are people who have done it." Maybe. But so far I have not received any proof. Whitney' lawyer sent me a list of these testimonial givers addresses and phone numbers. The first one I called asked me who was calling then said I had the wrong number. I have not yet tried teh others. Generate up to $3,000 to $5,000 of income every month Now wait a minute! Which is it? "$1,500 a month in passive income" or $3,000 to $5,000 of income every month?" Whitney can"t even keep his story straight in the space of a single infomercial? Why were we screwing around with a measly $1,500 a month earlier in the infomercial if we are going to learn how to earn $3,000 to $5,000 a month? Probably because this is all a bunch of bull so it doesn"t matter which number you pick out of the air. I already explained to you how to earn $1,500 a month. Just multiply those cash down payments proportionately to learn how much cash you have to have to earn $3,000 to $5,000 a month. I"ll give you a hint: It' about two or three times as much as it takes to earn $1,500. Get 100% financing Not that much of a trick these days if you have good credit and are buying a home to be your principal residence. If you do not have good credit or you are buying a rental property, you will have probably have to commit fraud or take advantage of an unsophisticated seller to get 100% financing. Welcome to Russ' world. See my article Are Russ Whitney' property improvement loan techniques illegal? for details. You need no training other than these workshops According to the narrator, you need no training other than "these workshops." That refers to the "free training." But I have heard and seen numerous complaints that the "free training" actually offers very little training on anything"”let alone everything. Rather, it is just a high-pressure sales pitch to get you to sign up for paid seminars. In fact, real estate is extremely complex. You need to train for a lifetime on all sorts of things that Whitney does not cover or covers inadequately like air-conditioner maintenance, federal income tax laws relating to real estate, and so forth. Owning real estate is running a complicated business in a dynamic environment where things change annually. John T. Reed, a.k.a. John Reed, Jack Reed, 342 Bryan Drive, Alamo, CA 94507, Voice: 925-820-7262, Fax: 925-820-1259, www.johntreed.com

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