The End of Armchair Investing

Bigger Pockets alerted me to the lawsuit against the Marshall Reddick Real Estate Investment Club.

I was waiting for this to happen. "Armchair investing" is based on series of seminars and meetings where developers and agents tout $100k-$200k properties for sale in states like Alabama to equity rich California investors. Investors, usually newbies, come to these 3-hour seminars and meet with the agents to purchase property in as little as 15 minutes. When I first attended one of these seminars last year (the subject of one of my first blog posts), I found it mind boggling that such transactions were performed based on trust that the "network" was offering an ethical and real deal.

This is a reputation sell. Complete trust is obviously necessary for a transaction that is tantamount to buying 3-5 brand new BMWs in 30 minutes. I expected the first lawsuits would destroy the credibility not only in the Marshall Reddick network, but the other investor networks like Nouveau Riche and the local real estate investment clubs that meet regularly all over America. Why? Real estate investment as a product requires a sales process that needs to overcome a series of objections - the possibility of being fleeced is a huge one and the lawsuit exposes that risk.

In essence, real estate investment clubs are run by loan brokers and entrepreneurial real estate agents, promoting an investment product that is currently  not receiving good press play. I do know some trustworthy, experienced real estate investment advisors who know what they are doing - they are hard to find and verify. It would behoove these advisors to promote themselves on reputation engines like Yelp or homethinking.

I'll be watching how the business model of global real estate investment will change. The product is real - real estate as an investment has become more accepted as valuations and transaction processing becomes more transparent, automated and standardized. The company or brokerage that can package a reliable investment product offering can leverage corporate brand name reputation... the current crop of investment networks are too focused on recruiting new investors like a Learning Annex to be considered "mainstream" or established.

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  • 7/18/2007 9:21 AM Galen wrote:
    Good take on the reputation networks, Pat. Do you think that those networks might need to build their own reputations first though? Most people haven't used Yelp or HomeThinking, so they won't give the reviews the same weight that they would give Amazon or Ebay reviews (and why doesn't Amazon have a business rating service!).

    I'm interested to hear what you think.
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  • 7/18/2007 10:15 AM Geoff Green wrote:
    I agree with your observations. For some reason many people seem to believe that all they have to do is purchase a property from a "wholesaler" and they will make money.

    I get emails from wholesalers on a regular basis. There are some good purchases and some extremely bad ones.

    In almost all cases I find the "projected sales price" to be - let's just say "exagerated" somewhat. Some are downright ridiculous.

    So if investers aren't willing to do their homework then they risk getting fleeced.

    Unfortunately there are a lot of "teacher" around to help remove money from your bank account.
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  • 1/21/2009 12:12 PM Affordable Land wrote:
    The comment about "Investors doing their homework" really caught my eye. When considering undeveloped land for sale in particular, you must consider your purpose for buying land. Do you intend to use it for recreation (camping, etc.), future residential development, or hold for future sale? Doing your homework with the available resources (County, etc.) will reveal important aspects, such as utility availability, code restrictions, and just plain access to the property. This is especially important when buying land sight unseen. Any reputable land sales company will encourage prospective buyers to use all available resources before purchasing land.
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