Over the past 5 years, I have ordered the real estate investing packages from Carleton Sheets and John/Greg Rice (the midget realtors). While I did not get taken in to pay more for the one-on-one training or the exclusive seminars, I know I wasted over $250 on the introductory packages. It took me several years of trying to use the offered concepts and strategies to realize it was nonsense. I was confused and frustrated that the folks on the infomercials made the system work and I could not. I thought that if real estate investing worked anywhere, it would certainly work in Las Vegas where I live? By the time I realized the stuff was crap it was too late to get my money back!
The light of day finally broke through after I got married to an experienced mortgage broker. My new wife found my Carleton Sheets stuff hidden in a garage sale box and laughed. I told her that I didn't see what was funny. I had spent nearly 3 years before we met trying this stuff to no luck! She sat me down and explained exactly why Carleton Sheets' system as well as a dozen other similar systems may have worked 5 years ago, but none of them will ever work today.in about 1 hour I got a lesson in the reality of investment real estate mortgage financing. Here is what I learned from my new wife, a mortgage broker for over 12 years in Nevada, Arizona and Colorado. I talked with 4 other mortgage brokers in her office and got the same information.
Prior to 1998, it was possible to buy a property, fix it up quickly and cheaply, and then resell it for $10,000s in profit. Now known as flipping, many mortgage lenders did not care as long as the property appraised out at the higher value. What turned the tides on this money making industry was the incredible increase in foreclosures that began in 1999 and has blossomed over the last 4 years. Mortgage lenders that had refinanced properties valued at $100,000 were finding them to be worth lots less when they went to foreclosure. As more properties went into foreclosure, property values dropped. (Property value is based partly on the previous sale of comparable properties.) It doesn't take banks long losing money to change.
Since states have begun to implement anti-flipping laws that go after real estate investors and appraisers who artificially inflate property values. Appraisers must now look for comparable properties within a 1 or 2 mile radius of the subject property to get fair market values. Many states now require anyone selling more than a few properties a year to obtain a real estate broker's license. As of my wife could not think of any mortgage lender that would refinance a property for cash out if the property was owned for less than 6 months and most require 12 months. Even then, the owner had to show real receipts for improvements!
If someone had to sell their home after less than 12 months residency in it, the original purchase price would be used as the appraised value. Also, people hoping to buy homes below their appraised value and then get the difference as cash at closing will be sad to know it can't be done! Mortgage lenders will lend money based on a property's purchase price or appraised value at time of sale whichever is LOWER.
Flipping real estate became such a money loser for mortgage lenders that they have refused to do the loans! Anyone wanting to engage in flipping real estate for big money will have to find a source of funding other than banks and credit unions! Good luck - those are few and far between and charge too much in interest! My wife explained that nearly all of the Carleton Sheets-type real estate investment schemes rely on long gone mortgage financing before the anti-flipping laws.
Also, many real estate investment gurus recommend making deals with property owners and have the owner do the financing while you make payments to the owner over several years and then sell the property and pay the owner a lump sum out of the proceeds. My wife says that she has never known a property owner who wanted to engage in that type of deal. If the investment property is making money without the new buyer, then why should the owner enter into a deal that will require higher rents to make 2 people money instead of one?
Finally, my wife and her colleagues in her office made a very common, but sound observation. If someone has a truly profitable unique real estate investment program why aren't those folks still doing it full time instead of teaching others. The money Carleton Sheets and all others like him make is out of selling information to fools who believe it will work. The successful students often made their money before the anti-flipping laws and now have either gone to work for their teachers selling outdated information OR have gone into the real estate investment teaching business themselves.
One of my wife's fellow brokers did come across a company that puts out a guide to real estate investment using current mortgage financing rules. I read the guide and found it interesting. It was meant for people who want to buy investment property and hold it for rental income or sell off a property or 2 ever couple of years. It was definitely not for those who still believe they can flip homes for big profits in 60 days. Banks and credit unions won't lend the money!
If they did, my wife and her colleagues would be making money by handling the purchases! The flyer I read was from a company called The Corner Source here is old email [email protected] I don't do any real estate investment now, but this guide made sense and my wife says it is good and they don't ask for $1000s for seminars! Take it for what it is worth. Real Estate Flipping is Illegal and people are in jail for it!!
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