The only thing better than making a lot of money is doing so effortlessly. A variety of middlemen have sprung up to relieve real estate novices of the burden of doing anything besides forking over a wad of cash.
They’ll find the property. Suggest a mortgage lender. Arrange for a management company to find tenants. And repeat, over and over and over, what a smart thing it is to be doing this.
Mile High Capital Group, a Denver firm, has been making repeated forays to California to sell duplexes it plans to build in Colorado, Florida and North Carolina. Presentations in San Francisco in January and Los Angeles in February drew about 400 people each, some simply curious, others brandishing checks.
On the stage, the Mile High speakers sell the idea of real estate. “I’m telling you, from the bottom of my heart, you gotta do this,” Chief Executive Rick Dryer exhorted the crowd at the San Francisco convention center.
The firm’s sales pitch is that it has done extensive research to determine which communities will be experiencing substantial growth, which will lead to a brisk demand for rental housing.
One of Mile High’s developments is in Ft. Lupton, north of Denver. “Few areas in the U.S. afford you to go skiing one day and golfing the next,” a company brochure explains with enthusiastic if idiosyncratic English.
At the side of the room, representatives of the mortgage brokers Investment Property Funding offered counsel. In the rear, Mile High representatives unfurled scale drawings of their new neighborhoods. People could mark off the duplex they wanted, provided they were willing to immediately fork over 5 percent of the price, which was usually $330,000. They won’t see the finished product for as long as two years — an eternity for investors.
There are other hurdles. One potential investor asked why the Florida duplexes, northwest of Orlando, were described as bringing the owners less than $30 a month after mortgage payments and other expenses — hardly worth bothering about.
“If you buy in Florida,” said sales director Andrew Eikenberg, “you’re really betting on appreciation.”
That investor walked away, convinced the bet was unwise.
Those who bought had more faith: that their project will be finished, that the communities in which they’re located will become vibrant, that tenants will be plentiful and eager to pay enough rent to allow investors to recoup their costs. And if any of these things don’t come true? The contract states quite clearly: The buyer assumes all risk, and the 5 percent down payment is not refundable.
“Maybe I’m naive,” said Massoud Balbas, a Laguna Niguel, Calif., computer consultant who attended the L.A. presentation, “but I thought [the speakers] were genuine.”
Balbas bought a lot of tech stocks in the late ’90s, an experience that left him unhappy. “I had no idea what I was doing. I put everything in one basket. Real estate is different. People are always going to need homes.”
More Top Picks Best Desk Chairs For Teens
His own home has ascended in value from $400,000 to $1 million.