Re: Carlton Sheets Course - Posted by Jeffrey D. Smith
Posted by Jeffrey D. Smith on February 18, 2001 at 13:12:11:
I bought the CS course way back around 1996 while I was living Houston TX. At that time, the vacancy rate for rental properties (residential and commercial) was very high and the monthly rentals were much lower than what would justify the investment in income property.
However, the information is a very good introductory course on real estate investing. I also purchased his “upsell” courses on distressed property, partnerships, and extra video tapes (I think the video tapes are now standard in his $180 course). I think you can also upgrade his course for about $30 to get time-coded audio CD, instead of cassette tapes. If you have a CD player, then get the CD, because you can easily bounce around to various sections.
The big printed manual had only one math error that I could see regarding calculating a broker’s commission based on the total investment (the case where you are offering to pay the broker’s commission, rather than the seller paying the commission).
The main thrust of the course is “no money down” using the property as the total security (your purchase contract has a “buyer exculpation” clause that relieves you from any deficiency liability in the event of foreclosure). “No money down” only means that you are not coming up with cash, but rather borrowing whatever funds you need (from a variety of sources) to close the deal. You need to understand the Time Value of Money, how to use a financial calculator, how to estimate income and expenses. You only want to purchase properties that are self-supporting and generate positive cashflow. Personally, I would never purchase an income property that didn’t generate a significant positive cashflow per unit; enough to offset vacancy rates, deadbeat tenants, maintenance, etc.
Maybe 10% to 15% of the available properties at any particular time are receptive to creative financing. I’ve read horror stories about naive CS students attempting to make “no money deals” that include steep discount on the purchase price, as well as seller carry-back (and broker commission carry-back financing). That is just plain stupid. As Carleton Sheets points out in his course, the value of a property is greatly affected by the financing of the property. Also, single family homes are more difficult to purchase with creative financing for a variety of reasons (mostly emotionally subjective rather than business objectivity).
Fortunately, my credit and financial resources are such that I can purchase real estate using “traditional” methods, rather than heavy financing. I am still satisified with my purchase of the CS course and the advanced courses.
It’s not a “turnkey” systems for quick riches. You must study, research, drive the neighborhoods, invest in your self-education.
Being a single parent is tough, especially with more than one child. Real estate investing requires time. You may want to consider collaborating with a good friend to divide responsbilities and time commitments, then share in the profits. Be careful about your legal business relationships with friends, because sometimes friendship and business don’t mix well.
The informercial has the standard formula like any other business opportunity informercial, with one remarkable exception. You know that only the cream of the crop testimonials appear on TV; however, the stated incomes are NET of income taxes, rather than gross (like most other infomercials). That means that those highly successful students are netting very good incomes (before income taxes and after all expenses including financing). You are seeing the highly successful 0.5%, the vast majority are not that successful.
You definitely need a good grasp of basic high school skills like reading, writing (spelling, grammar, punctuation, semantics), arithmetic (you must understand mathematical formulas). If you don’t understand how interest and principal payments are calculated, then you are at serious risk of making a bad investment or missing a good investment.
You’ll need to form a team; attorney to review initially your intended contracts, accountant/bookkeeper for servicing your income streams and preparing taxes, escrow and title companies, handyman companies for repairs/maintenance, real estate agents and brokers for watching for good deals. You need to approach this as a true business; you need to commit yourself to excellence.
Sadly, some folks don’t have the aptitude for real estate investing. That doesn’t mean they’re stupid or ignorant; just that their brains are wired differently for some other endeavor.
My very first real estate purchase was years before I got the CS course. That purchase was “no money down” on a duplex house. I lived in one side and my tenants lived in the other side and their rent payments covered my entire obligation on the property. I lived there for the cost of my own utilities (separate meters). Such deals are much harder to find now, but may be a good way for you to increase your net worth while reducing your monthly living expenses, thus freeing up more of your earned income for more real estate investing. Stay away from property management companies until you have a sizeable portfolio of properties.
Don’t invest in the “coaching” program; the information in his basic course on property management is more than adequate for now.
2 cents worth. Your mileage may vary.