5 eerr maybe 7 things I learned about humans by attending a smarmy real estate seminar.
I knew what I was getting into going into this. I went along to support a friend who was feeling some pressure to make it to the next rung in his life. He’d heard a commercial about how to make tons of money flipping houses with no money down and was eager to start his new life as a land baron along with the other 80 people attending.
We arrived early and approached the non-descript rented conference center. We were greeted immediately by two people who had both the social err of a junior politician and the overly nice mannerisms of someone who wants something from you. We knew going in that they would likely be trying to sell something. I figured this would be just one more chance for me to practice saying no while mentally jousting with salesmen who ignore the word “no” like that friend that always insists you do shots on spring break.
What we experienced did not disappoint for someone attending to see a shameless sales spectacle in action with someone selling something they clearly know is a lie. I literally felt like I was in the old West listening to a snake oil salesman sell his product from the side of a medicine stage coach with village folk gathered around.
As we proceeded into the conference room, I could immediately see that the other attendees were from all walks of middle and lower socio economic status, also convinced that this was about to be their big break. I scanned their faces, they were excited, and I felt like a jerk for being the skeptic in the crowd that would be destroying their dreams if only silently in my head. Some people came dressed to denote themselves as more serious than others. I fell into the latter category with my workout shorts, hooded sweatshirt and two containers of liquids-one coffee and one water. The whole place had the stench of desperation found in a payday title loan store, no matter how the people were dressed.
See the problem with these get rich quick seminars is that people also view them as a legitimate and LIKELY prospects for them to make money and be successful. This is in spite of the fact that there were warnings on virtually every slide of the “presentation” stating that “results are not to be expected”, essentially confirming that any of the success stories they had shared as likely results, were outliers that defied the absolutely terrible odds of making money using their scheme err, I mean system.
The presentation began to go through each of its talking points in clichéd fashion, telling us how we didn’t actually need any of the things that a person obviously does in fact need for real estate-money, time, know how, some demonstration of aptitude for throwing around 6-figured sums of money.
The instructor was an older man with a transparent and calculated smile, using it like a disarming weapon, probably in his fifties, who proceed to garner his credibility by saying how he sold his first property when he was just out of college, describing how much money could be made for an early retirement. My face spasmed slightly as my last remaining cerebral calculations completed using the power of the thermos coffee I had brought with me. ‘If you’re making so much money, and real estate bought on highly leveraged debt is the path to retirement, why aren’t you a) retired already and b) selling this course instead of focusing on your clear real estate empire?’ I first wondered, then grumbled just loud enough for no one to actually hear me. Ok, maybe I only said it in my head.
Where had I heard this line of thinking before I wondered? Oh right, this was the same bullshit I was hearing right around the time of the housing crash in 2006-“Buy real estate using other people’s money, then just fix and flip the property for more money”. Why isn’t everyone doing this! Probably because it’s more complicated than that and it caused Americans to lose 40% of their wealth the last time around. Risk muther truckers that’s why! Buying properties leveraged on other leveraged properties is like falling victim to a Ponzi scheme that you run on yourself. If you owe $1200 a month in payments and rent a property for $1300 a month, taxes, property management fees, and repairs will eat any theoretical cash flow. It was hard to watch.
But it didn’t all need to be cynical observations on my part. Perhaps there was something that could be learned from the misfortune of these people and applied as a template to help others avoid a similar financial pitfall. Below are 7 possible observations to consider if you’re looking at your next big endeavor.
1) Looking at the dissenting point of view can have tremendous value. It’s the core of concepts like having a diverse pool of thought to influence you, and ironically it’s frequently the perspective that you often don’t want to hear that has the most value and stimulates you to grow, because none of us knows it all. Think of the reviews on Amazon, many of the most insightful and useful ones are the negative ones. They tell you what is potentially wrong with a purchase, where you might be wasting your money, and occasionally what a better substitute is.
2) Most Human beings inherently want to see a good or positive side of their future life. This leaves a vulnerability that is often exploited and hijacked in sales. Paint a picture that is so robust and glamorous that people begin to picture something so positive that they will ignore the negatives begging them to be cautions, and defend their new dream to keep you from stealing/denying it. They actually encouraged this line of thinking during the robbery, I mean seminar, telling people that anyone who disagreed was basically a hater and should be ignored. It felt like a cult. Pump the breaks a little step back and make decisions slowly not impulsively. Speaking of which….
3) The urgency sell works. Rushing makes humans behave emotionally. If you tell a person that you’ll sell them a widget for 20% off they might say ‘It’s a good deal but not great enough for me to pull the trigger so I’ll think on it calmly, rationally, and slowly”. But if you tell them that this is the last widget available because all the rest have sold out, it a) creates an urgency that wasn’t there and b) creates a false narrative of social proof since it is implied that your decision to purchase it is supported by all the other people that did it before you. Just thinking about those 2 scenarios, doesn’t one feel more emotional than the other?
4) The scarcity mentality works (because it creates urgency-See above). As we walked in, there were only about 20 chairs set up, even though you had to RSVP in advance and bring a guest. In other words, they knew we were coming.
As each group of people walked in, these “masterminds” would walk ahead of you and unstack chairs for you to sit in. Why was this? They knew we were coming. They had plenty of time to prepare. They even had plenty of room in the ballroom. They were trying to subtly imply that there were more people than there were products or opportunities, in order to trigger our scarcity mentality and cause us to “rush” to beat the other people at buying their product. Once this happened….
5) Social proof is more powerful than people think. Once this happened, it became a self-reinforcing perception, much like a slightly racist aunt or uncle’s world view. People later began rushing to beat the other attendees to the purchase table. The other attendees saw how many people were moving, causing them to decide to move so they wouldn’t be left out of this now visually and socially observable correct decision. Nothing draws a crowd like a crowd.
6) People want to hear that the rules and repercussions don’t apply to them (bad credit, no money saved, no experience). If these things are in fact so arbitrary, why is it that billion dollar corporations rely on them when deciding if they will give you a loan? It’s called the four “C’s” (Capacity, Capitol, Character, & Collateral) and is not only the basis of most mortgage transactions but many other business deals.
7) There are plenty of ways to make money in real estate but these aren’t it. Tons of people have made boat loads of money in real estate, still more people have lost even greater sums in real estate because they leveraged and extended themselves too far, or simply didn’t take enough time to understand the risks involved. When that happens it only takes a swing in interest rates, economy, or perhaps a rise in crime in your area to dissolve your profit.
The painful truth is that you will need the majority of these things to make money in real estate, and even then it’s no guarantee. Sometimes bad luck even hits the people that are prepared. Knowledge is power. Putting it into action is even more powerful, but getting bad advice from someone selling you something they wouldn’t buy themselves will only set you off course.
Feel free to leave your thoughts in the comments below.