why do people subscribe to the "buy an asset with no cash" notion?

I’m only asking this because I subscribe to the REI newsletter and there was a posting regarding a teleseminar about apartments from a woman named Karen so obviously the owners of this forum and website are willing to “put their name” on this woman.

Just trying to understand a bit. From any commercial investors I have spoken to, it takes a good amount of cash to get going in the commercial sector. Then I read stuff like this and think twice then juts wonder who is right?

"“Having owned a shopping center for 2 years which
now has more than $5 million in equity and roughly
$22,000 per MONTH in positive cash flow, I can
tell you that Karen’s techniques are by far the
most lucrative and usable strategies I’ve ever
seen. These are cutting edge ways to structure
your deals without cash, credit or experience
start making IMMEDIATE cash flow. She has helped
me immensely!”
Jeff Pesis. - Manhattan Beach, CA

“Within 3 weeks after taking Karen’s course, I opened
escrow on a 92 unit building in Oklahoma City. Using
her techniques, I am getting in with no money down
and expect over $8,000 per month in positive cash flow!”
Marcia Kimura, Los Angeles, CA"

sound like an infomercial at 2am but I respect the information here so I thought I would ask.

Buy an asset with no cash -
This is the way to market to those people with the “get rich quick” dreams who are eating a gallon of ice cream at 1am. They’re probably awake because they have no job to get up for in the morning (meaning their “entitlement” checks are flowing from the govt). Later with a track record, it is completely possible for someone to get properties for little to no money out of pocket. For a newbie to buy their first property like this is a long shot to say the least.

Understand this website sells advertising as well as offering these great forums. I’m sure they made a little something off advertising this teleseminar. So it may not be so much of them putting their name on Karen as it was them providing a service and making money off Karen’s advertising dollars.

From my experience, it takes a good bit of money to get going in the residential sector as well. If you have no cash, the first time something breaks that’s a significant expense, you’re screwed.

I agree with justin0419. It is a marketing ploy.

However since I made money that way it is more knowing the real costs. I was an experienced home remodel when I started with good credit so that removes most of the people looking to do this. Started with houses using partners and hard money lenders.

The real problem with the no money down idea is they base it soully on the idea of Return on Investment which focuses only on cash. So if in invest no cash but make a dollar at the end you are on your way to being the next billionaire.

What often gets ignored is what is the cost of holding the property since that is going to have monthly payments you need to have the cash for and if you are doing sweat equity (meaning work), what is the cost of your time. That is what you need to calculate for your personal ROI.

For Example:

Worked a house for one month
Made $5000 with no cash in
Cash ROI = Infinate return on investment
Cost for 1 month labor at a day job $4000
My real ROI = $5000-4000/4000 = 25%

Worked another house 3 months (complications)
Made $1000 with no cash in
Cash ROI = Infinate return on investment
Cost for 3 month labor at a day job $12000
My real ROI = 1000 - 12000/12000 = -92%

I’ve only done one no cash deal on commercial. It was a run down property which the owner was someone that I knew. Couldn’t sell the property as it was so swapped an ownership percentage in which I took over managing the property and doing repair/maintinance. Again, had to calculate the cost of my expected time in order to determine what that ownership percentage should be.

There is no “get rich quick” unless you have a rich uncle die and give you all his money.

Warning bell always go off when I see courses with words like “Learn the secrets of…” or “Cutting edge ways…,” or “No cash, credit, or experience needed,” etc. Those with no cash, bad credit, or experience, are the weakest in this industry. Seminars that advertise vaguely like this do nothing more than take advantage of emotions.

I suspect most of these people don’t make money doing deals; they make money selling courses with either questionable or widely available information. There is very little new under the sun in real estate and this kind of hype exists only to take advantage of the uninformed.

Don’t you think that if seminar sellers could make $22000 and $8000 per month with no money down on their own, as implied above, they’d be doing it instead of sharing their “cutting edge ways” with others? The owners of this site have nothing to do with this.

This is a for-profit web site where revenues are generated from advertising. It’s up to you to decide whether the information provided in any ad or forum is valuable to you. No one here is “putting their name” on anything, anymore than CNBC puts their name on the 2AM infomercials they are paid to run.

Educate yourself, use common sense, and do your own due diligence.

There are many, many companies out there that are offering “turn-key” rental systems that allow the customer to buy a home with very little money out of pocket. However more often than not the customer is finding out that being a landlord especially an out of state landlord is not all it is cracked up to be. By the time everyone gets a piece of the rents there is not much profit left for the landlord.

I'm only asking this because I subscribe to the REI newsletter and there was a posting regarding a teleseminar about apartments from a woman named Karen so obviously the owners of this forum and website are willing to "put their name" on this woman.

Just because someone has an advertisement on this site or in the Newsletter, does not mean that they are recommended by the REI Club. Most advertisements on this site and newsletter are paid advertisements.

Karen- when you say that occupansies in the commecial market are up, you’re referring to multifamilies, correct? Because I"m pretty sure that occupancies in the retail and office building sectors are down, so just wanted to clarify…

  1. [i]“Rents are up…”
  2. “…occupancies are up…”
  3. “…and being driven by the housing foreclosure market.”[/i]

I think Karen should substantiate these three claims by citing sources.

First, Karen, thanks for being willing to respond. I do hope you will consider some of your marketing methods though. You are selling something that you have the financial means to do to a party of individuals that have 1) mostly bad credit, 2) typically limited income, and 3) very little knowledge of the way things really work.

So basically you have the ability to expand your kingdom by feeding off of the people. I commend you and wish you happy hunting.

I agree with you that now is an excellent time to get into commercial, particularly multifamily properties. Problem is that lending is getting more difficult. Especially with seconds on properties. I recently did a deal where the seller was willing to carry a second with no interest and no payments for three years but the lender would not allow a second on the property even though the cash flow would have carried it. Lenders are not taking any risks now so you are pretty much coming in with 20% to 30% down though I’m sure there are exceptions. Especially with the market that you are targetting.

I have no doubt that your testimonials are true to the limited scope of what they say. Keep things broad enough and even psychics seem to know what they are talking about.