What happens to you at Russ Whitney' beginner 3-day real estate training by John T. Reed I have received a number of reports about what happens at Russ Whitney' beginner 3-day real estate training"”a three-day program I have also seen called the "Real Estate Training Academy." They used to call this "the 1590" at Whitney HQ because that was the price after discounts for years. I have now heard that the price is up to $1,790 or some such. Selling and more selling The most common comment I have received is that every contact with the Whitney organization"”including your attendance at paid seminars"”is used by Whitney' people to pressure you to buy more seminars and other expensive services. It matters not whether you called them to ask a question or they called you or you are attending an instruction program you paid thousand of dollars for. Everything is at least partly a commercial whether you paid for it or not. There is nothing wrong with mentioning or boosting other products briefly at a seminar. I did it myself when I did seminars. But what I and others did was merely mention that we had books for sale in the back of the room and have a person back there to sell them to those who were interested"”similar to what I do at this Web site, i.e., mention a pertinent book of mine when appropriate. What I have been told that Whitney does is devote hours of paid seminar time to trying to sell you more seminars. One attendee said the first and last hour every day was consumed with efforts to sell you on more seminars or "mentoring" or consulting. This was at a three-day seminar where each day' instruction lasted about six hours, so he was saying about a third of time you thought was going to be devoted to the instruction you paid for was really devoted to pressuring you to buy more. Another attendee, in 2003, said the last day of the three days was almost entirely pressure to make you buy more seminars. Persons who paid for the right to call Whitney' organization to get advice have complained to me that the "advisors" were always more interested in pressuring you into buying another seminar than they were in just answering your question. Often, the answer to almost every question was, "You need to take this other seminar." Ridicule Ridicule of various forms also seems to be part of what you get for paying thousands of dollars for a seminar. One form of the ridicule is to accuse those who only buy one seminar of "fishing with a hook [only attending one seminar], rather than fishing with a net [attending all $40,000 of Whitney' seminars]." Another form of ridicule is to accuse you of claiming to "know everything" if you refuse to sign up for additional training. Another is accusing you of not being serious about being a success or real estate if you refuse to buy more seminars. At the very beginning of one paid seminar, the instructor invited anyone who wanted to leave right then to do so and get their money back. No one did and he said something to the effect that no one ever did because everyone was committed to their future and motivated and they were not the kind of loser who would do such a thing. Well, it also might have something to do with the fact that they just got there, had to pay for the travel and hotel room, and are hoping for the best. Saying this sounds more designed to intimidate anyone from leaving at the end of the first day"”a point at which I understand many have been told they can still get a refund. Contest to raise credit card limit Numerous Whitney grads have reported that the speakers run a contest to see which attendee can raise their credit card limit the most. Reportedly, each student makes a phone call on a speaker phone with the rest of the class listening. They call their credit card company and ask for an increase in their limit. Others have told me this was to be done in your room during the three days, not on a speaker phone in front of everyone.
Ostensibly, this is to help you obtain financing for your real estate investments. But it is generally crazy to borrow against a credit card to invest in real estate. Why? The interest rates are too high and the annual constants are even higher. See my positive cash flow article for an explanation of those terms. The best way to finance real estate is with 30-year mortgages in the vast majority of cases. One of the ways we learned to evaluate the competence of a businessman at Harvard Business School was his cost of capital. In other words, the more you pay to rent capital, the dumber you are. Using credit cards to finance investments would put you in the dumbest category of all. A number of Whitney customers have expressed the belief that the whole credit card exercise was more for the benefit of Whitney than the students"”that they wanted to know how much you could afford so they could pressure you to spend as much of that limit as possible. That strikes me as a more likely explanation of the emphasis on credit card borrowing. There is also the issue of privacy. Your credit card limit is nobody' business. Unhappy customer I got an email from a guy who took Whitney' "Real Estate Training Academy" in Calgary on 2/28 to 3/2/03. He felt the course was not what he expected after listening to the "free training" pitch for it. He also did not feel it was worth anywhere near what he had to pay for it. The student was told the seminar would be an "extraordinary experience" and that the training was "intensified." He felt it was neither, that only less than one day' information was presented, but stretched out over three days. Real estate license course lite One guy who took the three-day real estate seminar took a lot of notes and read them to me over the phone. There was even less useful content than I expected. The vast majority of so-called investment books are merely dictionaries that are not in alphabetical order. That is, they just define real estate terms and procedures. This is true of books about stocks and bonds as well as real estate investment. I had never heard of a seminar that was just a real estate dictionary that was not in alphabetical order, but this attendee' notes seemed to indicate that Whitney' $1,790 was more or less such a dictionary. It sounded like a watered-down version of the sort of information you would get if you took an inexpensive real estate salesman' license course at your local adult education school. For example, the attendee received a list of different types of real estate financing like FHA, VA, conventional, seller. You would probably get that list for free if you walked into a real estate brokerage and said you wanted to buy a home and that you were unfamiliar with the process and options. Like a lot of other things, it' probably available for free on the Internet. My $29.95 book How to Buy Real Estate for Little or No Money Down contains a more detailed, more comprehensive discussion of the various financing approaches than you would get from an agent. There are many places where you can get such a list for free or for a lot less than $1,790. The attendee also wrote down that "commercial real estate means big money, wholesale buying means quick cash, and foreclosures are a way to replace your weekly paycheck." That' not valid how-to real estate investment information. It' sales hype to get you to buy more seminars. Commercial real estate typically has higher purchase prices than houses. It also requires more technical knowledge to buy and manage. Frequently, lenders will not loan to you if you cannot prove that you are qualified by training and experience to manage such buildings. That' even true of apartment buildings. In short, the sort of people who are attending a beginning Russ Whitney seminar are a long way from being ready to do commercial real estate deals and they should be told that, not encouraged to think of commercial as a way to make "big money." "Wholesale" is a word that seminar gurus and their students use but real real estate investors do not use. Wholesale is a word from manufacturing and distribution industries. It refers to volume discounts available to customer who buy large volumes of a product. Wholesale discounts result from sharing of cost efficiencies in manufacturing and/or shipping of bulk quantities. There are no such efficiencies in real estate unless you are a large scale developer. Real estate is not shipped. You can buy real estate for bargain prices. I have a two-volume book about it called How to Buy Real Estate for At Least 20% Below Market Value. But there is no bulk reason for such discounts. As far as bargain purchases meaning "quick cash" is concerned, it' is sometimes true, but in the opposite way to what Whitney seems to be implying. That is, in order to utilize some bargain purchase techniques, you need to have quick cash so you can buy the property quickly for all cash before another guys does. Bargain sell at lightning speed. Having quick cash to buy them is often a necessary part of bargain-purchase strategies. The notion that "wholesaling" will provide you with quick cash has it completely backward. Foreclosures are a very advanced, capital-intensive strategy. That is, buying them requires more skill and more cash than other strategies. To buy at the auction, you need all cash in California and other places. In some places, you can put 10% down and you have to get the rest of the purchase price within 30 days or some such. Only very strong buyers financially can play that game. When Whitney talks about foreclosures, he seems often to be talking about pre-foreclosures. That is, buying houses from people who are in the process of being foreclosed, but whose house has not yet been auctioned off. This is a viable business opportunity, but it requires some cash and much negotiating skill. In California, it requires compliance with two tough laws. Many who have tried this business found it was not for them. It requires persuading a person or family who have little left but their home equity to give you that home equity for little or nothing. Many people cannot bring themselves to do that. There are also a zillion competitors. Whitney brags that he trains 12,000 people a month. A great many of them and graduates of other similar gurus are chasing the relatively small number of pre-foreclosures. A pre-foreclosure investor I recently interviewed said the people he buys from get an average of 70 letters from various investors trying to buy their property. He has to contact about 100 such pre-foreclosees to do one deal. My attendee caller said Whitney' instructor also recommended discount mortgages. Again, there are a zillion guys teaching seminars on that and a zillion graduates of such seminars chasing relatively few such mortgages. Take back a mortgage when you sell and see how many letters you get a week trying to buy your mortgage at a discount. Sellers are the main source of such mortgages. But sellers have not taken back mortgages much since the early eighties. The mortgage market has gotten so varied and flexible that seller financing really is not needed any more. Whitney and other gurus often sell you techniques that have not worked well in decades, if ever. Another note he took mentioned sources of seed capital like taking money out of your pension fund, borrowing from friends, borrowing on your credit card. I have been shocked at the willingness of bad gurus to pressure customers to run their credit cards to the limit and even raise the limits to get money to pay for seminars. Telling you to take money out of your pension and to borrow from friends to buy seminars is equally shocking. Telling you to use these sources to raise money for investing is less egregious but still questionable. Pensions have special legal status that is a good deal in many situations like income taxes and bankruptcy. Withdrawing money from a pension before you retire typically triggers penalties. You ought to think twice before you do it"”and consult appropriate experts. You generally should not borrow from friends. It is a good way to lose them and friends are a precious part of life. You should not be foisting off a lousy loan on your friends. If it was not a lousy loan, you would be able to borrow elsewhere. Credit cards are another bad source of down-payment money because they have very high monthly payment requirements in relation to the amount borrowed. When you use a 30-year mortgage, your annual payments are typically about 5% of the amount you borrowed. When you use a credit card, the annual payments are typically around 35%. Look at one of your credit-card bills. Multiply the minimum monthly payment times 12 to get the annual payment total. Then divide the credit card balance by that number. You"™ll find it' in the 35% or higher range. It is very hard to have positive cash flow with an 80%-of-value, 30-year mortgage. If you use a credit card for a down payment, you are all but guaranteed a crushing negative cash flow. Whitney' speaker urged the audience to ask their credit card company for a $100,000 line of credit. Since Whitney urges people with bad credit to attend his seminars, that is strange advice. In the first place, you would think people with bad credit would be making fools of themselves to ask for a $100,000 line of credit. On the other, suppose they got it? Such people obviously need training on how to handle credit before they borrow $1,000 more, let alone $100,000. The course contained some motivation, which you generally do not get in a real estate license course. But including motivation in what is supposed to be a real estate course was one of the first items I put in my Real Estate B.S. Artist Detection Checklist. One problem is that much of the motivational content is designed not so much at helping you to succeed as to motivating you to sign up for yet another seminar. In general, Whitney seminar graduates to whom I have spoken have described the information provided at Whitney' seminars as ordinary, run-of-the-mill, basic stuff that is common knowledge or close to it. Some have said the seminar is just a repeat of information in Whitney' books, which sell for book store prices. The seminar you "˜really need"™ is always the next seminar Time and again, Whitney attendees have complained to me that at each stage, they were led to believe the seminar they were being sold was what they needed. But no sooner did they arrive at that seminar but they were told this was not all they needed. Rather, they had to take additional seminars to get the real stuff. This starts with the "free training" which is depicted as a learning experience, but ends up mostly being a sales job on the "Real Estate Training Academy." But when they get to the "Real Estate Training Academy," they are immediately given the impression that it is only an introduction. In other words, on the infomercial, you are told you need seminar A. At seminar A you are told you need seminar B. But when you get to seminar B, you are told what you really need is seminar C. But when you get to seminar C"¦and so forth. The Calgary attendee said, "Had I known that I would be spending hours I had paid for (that should have been for training) listening to a sales pitch to spend upwards of $40,000 more on ridiculously overpriced training, I would not have signed up in the first place. Every lesson was at best incomplete (on purpose I now realize)"¦[to force you to sign up for the next one to get the rest of the information]." Entertainment or how-to information? The Calgary attendee complained that the speaker whom he called Mike was "mildly entertaining," but that he did not sign up for a real estate seminar to be mildly entertained. Bragged about suing critics One attendee told me that the speaker bragged to the audience that Whitney would sue anyone who criticized him. The attendee thought it was a threat to audience members that they had better not criticize him. Let out early An Arizona attendee told me their instructor let them out an hour early at the end of one of the three days. She complained that she did not want to be let out early. They had paid for three days worth of instruction and did not want 2.8 days worth instead. Her complaint was ignored. They lost the hour of instruction. Someone once said that education is the only thing people pay for then try to get as little as possible for their money. Apparently, this Whitney instructor was counting on that. Deductible? The Calgary attendee also complained that the speaker insisted that the cost of the seminar was tax deductible. In the U.S., that' generally true. You can deduct the cost of education if it helps you do your current job better, but not to meet the minimum qualifications of a new career. However, in Canada, according to the Calgary attendee, you can only deduct education expenses if the course is taught by a "fully accredited educational institute." I know nothing about Canadian tax law, but Canadians should check before deducting. Here is an email I got on 2/16/04 from a guy who was taken to this seminar for free by a friend who paid for it. "Dear John, "I'd be really upset if I had paid for this myself. To refresh your memory my friend paid over $1700 for an intensive 3 Day seminar. I'd estimate the speaker, Gregory Dowling, spent about 20% on feel good, emotional, raw-raw, motivational stories, about 40% on boot camps that were available (and everyone there would be making a mistake if they didn't join) and about 40% on real estate techniques and strategies. Needless to say, with only 25 total hours in the seminars and all that boot camp closing, I didn't learn much. Those in the room that were beginners didn't learn much at all because it was too hard to follow and only set up to confuse them anyway. I hope they have a plethora of law suits across the nation for false advertising. They didn't deliver near what they promised. However, I think about 2/3 of the room bought programs for $5000-$10,000. It really blew my mind. They really prey on the beginning investor. "I consider myself a novice investor having bought fewer than ten properties in my life. I have had a lot of training though. It seems there is a lot of money in real estate education. "Feel free to use any or all of this information on your web site." Roger Roman Pittsburgh, PA Copyright 2002, 2003, 2004 by John T. Reed Last update 6/18/03 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