Knowing 'Good' from 'Too Good to be True'

Services for Real Estate Pros with

How do you determine what's too good to be true, vs what's a really great deal?

At Real Wealth Network, we get lots of folks calling us excitedly to tell us about their latest investments. We've learned to screen these out rather quickly. Last year, a close friend called to tell me about a company that promised to double his return EVERY MONTH! You could invest $10,000 and get $10,000 per month, every month for the rest of your life.

It doesn't take much to figure out that this kind of return is simply unsustainable, and probably not even possible. However, the slick presentation got hundreds of intelligent people to sign up AND sign up their friends. Sure enough, no one ever received a $1 back. I would have liked to see real numbers on this deal - not speculation. But there were none. The entire business plan was based on speculation and "if-everything-goes-as-planned-policies."

Often people see the 30+% cash-on-cash returns on our website and tell us they think it's too good to be true. One of the reasons I like real estate is that it's straight forward and easy to figure out. If you don't believe the income numbers, you can talk to 5 property managers in the area to verify rents. You can ask for the seller's tax return to verify that the rental income was claimed. You can get a title report to learn about liens and owner history. You can get an independent appraisal to understand value and comps. And you can get independent inspections to verify the condition of the property. It's hard to pull the wool over your eyes, unless you just trust blindly and don't do your standard due diligence.

Don't think something is too good to be true, just because it's better than anything you've seen. People are getting rich all around you, so there are great deals out there. The questions is, "which ones." If you are not an expert on the topic, don't guess or believe the seller/promoter/commissioned agent. Get advice from a real expert - someone who has MADE money doing what you're trying to do, and not just from selling the concept.



Comments (3)

Don Eichler
Eichler Properties - Granbury, TX

Kathy, This advice is so good.  I don't know why people go for the Too Good To Be True plans.  I have a very good friend that goes for just about any promise but I don't think that he has ever turned a dollar.

Mar 02, 2010 11:15 AM
Robert Machado
HomePointe Property Management, CRMC - Sacramento, CA
CPM MPM - Property Manager and Property Management

Your advice to talk to a property manager is sound.  I am a property manager and help investors all the time with rent quotes. 

Mar 02, 2010 04:50 PM
Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

It's amazing how all common sense flys out the window when get rich quick greed takes over !

Mar 29, 2010 11:55 AM