The History of Creative Real Estate

If I had to say where the history of modern-day creative real estate started, I would have to trace those roots to the late 1950s. A gentleman by the name of Bill Nickerson wrote a book called How I Turned $1,000 into $5,000,000 in Real Estate in My Spare Time.  Although by today’s standards this book wouldn’t be very exciting and he probably wouldn’t sell very many of them, it was a best seller and was a great book for its time. The basic premise was to save money, put 25% down on rental properties, fix them up and sell them, then move on to larger properties and repeat the process all over again.

Fast forward to the 1970s when a gentleman by the name of Al Lowry wrote a best seller called How to Become Financially Independent by Investing in Real Estate. This was another best seller. It was pretty much a restatement and modernization of Bill Nickerson’s book.

Then in the early 1980s came Robert Allen’s book Nothing Down. This book blew all previous real estate books away. Why? Most people would rather hear they can get rich in real estate for no money down, without having to do a lot of work and by using other people’s money. Who wouldn’t? However, that’s just not reality! Sure, there have been deals here and there where someone got lucky and made a lot of money on a property, but those deals are few and far between. It's kind of like the person who made $50,000 a month in Amway®. There weren't a lot of them, were there?

Nothing Down is something of a misnomer anyway. Almost always these deals involve money, and it’s your money. Even if an owner deeds you their property, you can still have title insurance, making up back payments and other costs associated with the acquisition. Then you have costs to get the property marketed, keeping the payments current, utilities, etcetera. There’s always money involved. Although doing a technique from Nothing Down can avoid you having to go to the bank and qualify conventionally, you will still be paying something. One of the reasons I believe the book was so successful is because the thought of buying a property for nothing down sounds very alluring.

With the success of Robert Allen’s book in the 1980s, people became excited about real estate. Almost overnight the real estate seminar industry was spawned. Out of that have come dozens of so-called real estate gurus, people out of mainstream real estate who have developed techniques to more or less bypass the system. Many have left the real estate seminar business. Many have been indicted for fraud or had legal or bankruptcy difficulties. I’m certainly not going to get into a long laundry list of names, though, because it’s all history now.

What I can tell you is that many of the gurus who have survived throughout the years are making their money selling information, seminars and infomercials rather than from practicing real estate. I have been to at least 50 seminars in and out of the country myself, so I believe you could say I speak from experience. Some of the ones I went to were just pure lousy. Some of the ones I found to be the funniest were the gurus who had hired people to go out and speak in their place. You could “smell” on some of them that they had never even done a single deal.

What I found to be even funnier than that was when they were showing pictures of the deals their guru had done back in the 1970s. They had screen shots of Polaroid pictures (remember those?) of deals made 30 years ago. Talk about going back into a time warp! But it has been at least that long since most of the gurus have been involved in real estate on a significant level.

I found out after all of those seminars that there are several common threads between them. One of them is they aren’t selling real estate, they’re selling a dream. The dream is to become wealthy without a lot of work. Real estate is just the vehicle to get you there.

It’s just like network marketing, selling you a dream to become financially independent while having your downline do all the work. The vehicle there is always some lotion, potion, vitamin pill or soap. But remember the age-old adage, “If it were that easy, everybody would be doing it.”

Another common thread is every guru has the secret to making a fortune in real estate investing. You will notice almost all of them prefer to focus on foreclosures and sellers in distress. Each one has the secret to a myriad of magical things like, “How to find motivated sellers,” or “How to get sellers begging you to take their home,” or a host of other truly unbelievable promises they can never deliver on.

I have found that the secret to real estate investing is that there is no secret! Like anything else, you’ll need some good old-fashioned elbow grease, experience, some luck and a lot of determination and persistence. There are no magical phrases that will get a seller to deed you their house.

A recent hot topic in creative real estate is to offer special negotiation tactics that are supposed to give you an edge. Here is one guru’s actual teaching on negotiation, verbatim.

●   Start counting silently in your head. Keeping your mind occupied on something else is a recurring theme of many of these techniques.

●   Let your mind drift to a pleasant memory from your past and really think about it. This is especially useful when you ask a tough question of the other party with “big eyes.”

●   Focus on your body. This is used when they offer you a great deal you want to accept. You slow down, press your lips together with your top lip bubbling out, scrunch up your face and flare your nostrils as you audibly breathe through your nose, visibly struggling with yourself like you’re fighting an internal battle whether to accept their offer or not. Finally you reach over with a sigh and say, “Okay, you win. We’ll do it your way.”

●   If you’re on the phone and you ask a question that needs silence to follow it, do some mundane task around your office while you’re waiting for them to fill in the awkward gap.

Now, is that laughable or what? I don’t think you could even get an accomplished actor to do that, let alone some newbie real estate investor. These gurus take the same common threads and continually try to put a new twist on them every several years. It’s kind of like a fad--hot for awhile, then it fades away and then it comes back again.

Another common thread is motivation. Many of these gurus, the ones who have survived for many years, have become excellent speakers and salesmen in their own right. They certainly know how to play on people’s emotions, be they fear, greed, desperation or whatever else. Some of them are masters at getting people excited about wanting to do their real estate program. When these people get home from the seminar and realize how difficult the task awaiting them really is, however, they lose a lot of their motivation and enthusiasm.

There are successful real estate investors, though, individuals who have taken a particular guru’s program and done quite well with it. What I have noticed about this group isn’t really a big mystery. I believe those people just had the sheer determination to be successful. It wasn’t the fact that they were involved in a particular program. It was the fact that they were going to do it no matter what. I believe you could take those same people and they would become successful in any endeavor. These people actually went out, conquered their fear and did something. We have all known somebody like that at some point in our lives. Real estate was just the vehicle. The problem is, that’s not the way the majority of people are.

So with all of that now said, what is the bright side to all of this doom and gloom? It’s been almost 25 years since there has been anything new in real estate investing. That’s a long time! Let’s face it, things change; and if they don’t, they need to. That’s why I wrote this book. I’m attempting to bring to light what has been missing in real estate investing, to make it simple and attainable for the average person to cash in on real estate.

I think you would agree that, after having the same old gurus out there on stage for almost 20 years, it’s time for a changing of the guard. So exactly what am I saying that is so different? First, I would like to share with you one of the key principles that I learned from my real estate mentor and it is this: “The truth is always in the middle.” What do I mean by that?

Let me explain it to you like this. The gurus say that you can get rich in real estate by finding motivated sellers and using little or none of your own money. That’s one way of thinking. Another way is you have to be born rich or get lucky and be a Donald Trump. What we have here are two extremes. So where is the truth? It’s in the middle.

Most people in this country who are wealthy from real estate did not do it from foreclosures and getting the deed from motivated sellers. Most weren’t born rich nor did they get lucky. So how’d they do it? The truth is in the middle--the conventional way!

Most of the people who got wealthy in this country in real estate did it by buying rental properties, holding them and building up a portfolio over time. This could be with single-family, multi-family, commercial development or whatever other real estate investment vehicle they may have used. The point is it took time and they did it by conventional means, not from stealing equity from little old ladies or from those who are running on hard times.

I believe when you stop to really think about, you’ll know this to be true. It’s like the full service real estate brokerage which has been around for over a hundred years. Nothing lasts that long unless it has value to it. Business fads will come and go, but only solid business principles and models will stand the test of time and, unfortunately, nothing down isn’t one of them.

As a matter of fact, after almost 20 years of the proliferation of the nothing down technique, things are changing rather rapidly. Legislation has been passed in a few states already, and I’m sure other states will soon follow, that is severely restricting these techniques.

A big reason for the legislation, I believe, is because a lot of investors get in way over their heads on deals. Can you imagine being armed with a little bit of knowledge and going out and doing contracts and negotiating on most people’s largest asset, their home? It’s just asking for trouble if you don’t know what you’re doing.

This is tough to regulate on a state level; but after so many complaints by constituents for the bad deals they got into, either with unscrupulous investors or ones who didn’t know what they were doing, it was time for the states to step in to try to do something about it. It was more than just a case of a few bad apples. At the writing of this book, many gurus have been understandably concerned with this very issue and what can they do to work around it. I believe they are starting to feel some of the heat.

Go to consumerlaw.org on the internet to read a report that was released in June 2005 by the National Consumer Law Center (NCLC), a watchdog agency that has been around since 1969 protecting consumers. This report is a must-read for every seasoned investor and potential new real estate investor. It’s called Dreams Foreclosed: The Rampant Theft of American’s Homes Through Equity-Stripping Foreclosure “Rescue” Scams. I promise, it will change how you look at creative real estate investing. Sorry gurus! Always remember, if it were that easy everyone would be doing it.

Nothing down appeals to a lot of people because some of them have no money anyway, so the thought of buying properties with no money is very appealing to them. I once heard a speaker claim that, after 20 years of being in the business and even doing international deals, he had NEVER used one penny of his own money to do a deal. In 20 years – yeah, right!

Now let me ask you a question. If you were a multi-millionaire like he claimed he was, why would you have a problem putting 10% or 20% down on a property that you were supposedly buying for way under market value in the first place? You wouldn’t! Remember, the truth is always in the middle.

Most successful investors always put money down. In the real world it is much more time consuming to do nothing down deals. If you always try to put little or no money down, you are forced to work a few niches where you wander around trying to get sellers to deed you their property for nothing. Let me ask you a question. Why would you want to limit yourself like that?

I will say there is a small handful of real estate gurus who do it right. They try very hard and I feel sorry for them, always having to defend their position with all of the false promises and deception that goes on in this industry.

As you read further into this book, I am going to awaken you to the most powerful fundamental real estate technique that no one has ever taught before. Remember what I said earlier about there being nothing new in real estate for almost 25 years? The wait is now over!