Debbie
02-28-2008, 03:15 AM
Huh...that's weird....
Try this one: http://www.590klbj.com/News/Story.aspx?ID=85494
Here is another with the cut and paste from one of the links:
Mike Voss Reviews Armando Montelongo’s E-book
Frequent visitior, Mike Voss, offers the following review of Armando Montelongo’s e-books to readers of Flip This Lawsuit. Please note, Flip This Lawsuit has not reviewed the e-books, and the opinions expressed in the review are not necessarily those of Flip This Lawsuit.
You can view the entire review by clicking the title above.
Greetings everyone. Let me start by thanking those who loaned me their copies of Armando’s “e-book” and also saying sorry it has taken me so long to complete this review. Since I don’t want anyone, least of all Armando, to have any grounds to say that I have not thoroughly read and reviewed this book, I have read it no less than 3 times. The going was slow because every time I read something that needed to be addressed, which was constantly, I had to stop and write a point into my review outline which I later expanded into this full review. My approach was simple: I kept lists of good points and bad points as I read and every time I found either one I wrote it down. In the end, the bad points handily outnumbered the good points (and by good, I do not mean original or highly useful, but simply not harmful) by more than 4 to 1.
I will give you my overall impression of this work and then analyze it from beginning to end. With all that said, here we go.
There is a fundamental problem with Armando’s book that is, in my view, a fatal flaw. Let me see if I can explain it. If your objective is to be highly successful in any endeavor, it stands to reason that you may start out knowing little or nothing whatsoever. So, the question that naturally comes to mind is this: how can you become knowledgeable enough to intelligently get involved in this particular business? Bear in mind that this is one of the most complex endeavors you can get into. A house is a non-trivial entity with a myriad of complex systems and structures, all of which need to be made so as to last at least 20 years while protecting the safety of the occupants. That being said, let’s start with something a bit simpler as an example:
If you were interested in opening a pizza store, you wouldn’t go open a store after studying restaurant accounting, leasing spaces, price point negotiation, and other secondary things - not if you were smart anyway. You’d go work in a pizza store for about a year and learn everything from the inside out, and THEN apply that knowledge against accounting, finding store space, etc. in the context of your target business area.
Or, say you wanted to become an expert on cars so that you could buy, restore, and sell them. Would you go to work at a car dealership? Again, not if you are smart - you’d go work in a body shop for a year, and only THEN look into the logistics of buying and selling the cars you now have the skills to restore.
So, why then would anyone approach `flipping’ houses any differently? The answer is that, if they’re smart, they wouldn’t. And that’s where the problems with Armando’s e-book begin. The entire book is based on the approach that the reader will not have to ever know anything about repairing or building houses, and that is preposterous. Armando would have you believe that you can know nothing about the most expensive items any person will ever buy or sell in their lifetime, yet still be so much more knowledgeable than everyone else in the marketplace that you can exploit that marketplace to turn “30 houses every month”. (Which, by the way, Armando does NOT do and has NEVER done. Period.) This is flawed, incorrect, and inaccurate and, quite frankly, it’s just a lie. To say that a person who knows nothing about houses can make huge profits buying and selling them is akin to saying that a person with no knowledge of gemology can make a fortune buying and selling diamonds. That sounds preposterous, doesn’t it? So why does the assertion that you can do the same thing with houses, which are about as varied and complex as diamonds, sound any less preposterous? Anyone who thinks they can make a living dealing in a commodity in which they are anything less than an expert is a fool. I’ve spent 20+ years to get to my current level of knowledge, and compared to any number of other people out there, I still know very little. Do you think that, with no knowledge of homebuilding and repair, that you are even minimally equipped to do battle in this arena? You’re not!
I’ve said it before and I’ll say it again: there are no shortcuts. There are, however, books written by people with orders of magnitude more knowledge than Armando available at about 1/10th the cost of this e-book with about 100 times the useful information in them.
In case you don’t want to stick around for the post-mortem, I’ll mention a few now:
1) Flipping Confidential by Kirsten Kemp.
I’ll be honest - I didn’t want to like this book. Why? Because I watch Kirsten’s show Property Ladder and I know she’s a long time realtor and I generally don’t care much for realtors. Why? Because I think paying people the equivalent of a year’s salary for most people to sell a house (which usually is less than 50 hours total work) is arcane and on it’s way out. I notice a heavy real estate agent bias in the show from time to time, so that has always annoyed me just a bit. That said, this is a great book, especially for those wanting to find out what is involved for a first timer. It is, quite literally, everything Armando’s e-book isn’t and at literally about 1/10th the cost . (look for books used on Amazon and save big money - another tip you should know and use as you build your knowledge and library) This book will tell you, in the style which Kirsten tells the clueless fools on Property Ladder who rarely listen, how to do things correctly and what happens when you don’t. Included are tales of what happened when Kirsten got burned on different deals and why. If you only read one book before deciding if this business is for you, this should probably be it. It will detail for you all of the costs, factors, and variables you may not even know about - few of which will you see in Armando’s e-book. And Property Ladder is also a unique show to watch since you get to see what happens when people don’t listen - the failure rate is more realistic than other shows. And Kirsten is pretty easy to look at. ?
2) Be Your Own House Contractor by Carl Heldmann
You’ve heard it over and over: cut out the GC and do it yourself and you can save up to a 50% markup! Is that true? Well the number might be more like 25%, but it could be that high. The part that isn’t true is that the GC does nothing but hire subs to earn that money. Being a GC is the toughest task on any build. This book will educate you as to why. Most people are ready to save that money, but few are even aware of all the tasks they’ll be signing on for when they do and get into trouble fast. This book will give you a cut and dried blueprint including all the variables to figure out what you can save and if you should do it. Remember, in every state, General Contractor is a licensed trade designation - people have to put in a lot of time and experience to wear that hat, so you will need to understand what they’re responsible for if you want to tackle it. it’s a whole lot more and harder than you imagine it is, but you can certainly do it if you take the time to learn what’s really involved - and this book will tell you.
3) The Black and Decker “Complete Guide To” series.
Of all the books in my personal library, I can honestly say I refer to these the most. This series of full color illustrated guides to plumbing, electrical, carpentry, masonry, etc. are just excellent. B&D has gone to great lengths to make all kinds of special photographs including cutaway views and multi angles to show *exactly* how to do things and do them right and to code. Seriously, if you’re willing to put in the time and effort, you could plumb or wire an entire house with the knowledge in these books. They are always available in Home Depot which is almost certainly where I first found them, but can be had for huge discounts through Amazon. Whatever you buy them for, they are worth hundreds of times their price in knowledge, time saving tips, and just plain telling you how to do things right. The series were clearly written by or based on the work of master craftsmen and it shows.
4) Holmes on Homes http://www.holmesonhomes.com/
OK, this is a TV show, not a book, but it is the best show about construction currently on TV in my opinion. It airs on the Discovery Home Channel or you can buy CDs of entire seasons at the above website. In a nutshell, Mike Holmes is a master builder who goes to houses where people have been completely screwed by contractors, tears out the bad work, and rebuilds it correctly. The things the average person can learn from this show are staggering because the amount an experienced contractor can learn is immense. Mike Holmes is a 2nd generation contractor who grew up working with his dad who was clearly a vanishing breed - the old school kind of contractor who cared sincerely about his work and would never cut a corner. The true value of the show is not in the techniques or knowledge - it is in Mike’s attitude - he cares. Again and agein when he’s tearing out some terrible or dangerous bad work, he’ll say, “look at this, they just didn’t care” and that’s what it boils down to. If you want to do good work, you have to care also. You’ll also see how to deal properly with good trades people and the result of doing good work for people. As far as I’m concerned, Mike Holmes is the man. I’d work on his crew for free.
OK, now on to the main event. Here is my review of Armando’s $100 e-book.
Book 1 ”Foundation” 24 Pages
Right off the bat, this section was really annoying me. It is almost entirely composed of “how to get rich” book clichés which are not what we are supposed to be buying here. I have heard from others that some of it is directly lifted from such books by other authors. (isn’t that plagiarism?)
When this section finally gets around to talking about something of substance, there are a few viable points in it. There are some tips to avoid red-flagging the IRS (not really an issue if you’re not breaking the law) which are reasonable, but he recommends hiring a CPA when all that is really necessary is a skilled tax preparer. He also recommends using QuickBooks, which is a great program that I use. There is basic advice on insurance for properties as well, although owner-occupied houses will need different strategies.
That’s about it for the good in this chapter. We get a repeat of the now proven-false claim of flipping 30 houses per month (still waiting for you to post some kind of proof of that, Armando) and adds the new false claim of owning 100 rental buildings. (not units - buildings) This guy just never quits. If I had paid for this book, I’d be fuming at this point. The lies from this guy are just beyond insubstantiable. He then goes on to claim to be the number one house flipper in America and states that nobody flips more houses than him. Are you feeling glad you didn’t give him your money yet? Next Armando advises us to only take advice from people making at least 2 times as much money as you do. I would add to that that you should always QUALIFY that income, including Armando’s because, at present, his liabilities seem to far exceed his assets. We then get a plug for his mentoring program, followed by continual talk of a “system:” that will negate the need to learn anything about construction trades. Sound unlikely? That’s because it is - more on that later.
Finally, we get his strategy of what kind of houses and configurations to look for and in what area. While it sounds plausible for San Antonio, as I’ve often mentioned real estate is a local market, so this strategy will not work in a huge number of places. So that info will be worth nothing to many people and Armando demonstrates his clear lack of knowledge of real estate markets on a national level.
So, one chapter down - did you learn much? Hmmm, well, let’s press on.
Book 2 ”Find” 22 Pages
This chapter opens with our being told that “the money follows the deal”, meaning that if you can get a deal set up, money to make it happen will turn up. This is patently false, and a dangerous trap to set yourself up in. If property is like gold in your area and you could lock up the rights to purchase a house at a good deal, then yes, probably you could find someone to step in and either fund it for you or buy out your option on that property. The problem? In most areas of the country, those kinds of markets no longer exist. Furthermore, sellers don’t like that kind of crap and generally put in fail safes (like non-refundable deposits) to deter people who try to lock up properties in escrow without having any means to buy them. So no, money does not follow the deal, deals now follow the money, and if you have none you won’t be making any.
We then get a discussion of reasons for motivated sellers, all of which are old, outdated, and clichéd. People chasing the “4 Ds” of death, divorce, disease, and disaster nowadays are mostly wasting their time. People are not stupid and know in a heartbeat when a bottom feeder is trying to get into their good graces. It’s just not that simple and never will be again. What’s more, smart people have connections at much earlier junctions (i.e.; a divorce lawyer who could tell them long before you’d ever know of a divorce) that make these avenues worthless. Hot deals are found by much more sophisticated means than looking at foreclosure listings or obituary notices, and if you have the potential for this business you will figure those out for your market in time. The best way is being known as a good developer/investor amongst people who might have something to sell. (Would you want to sell to Armando based on what you know of him? My point exactly.)
The next recommendation in this chapter almost knocked me out of my chair. Armando actually recommends that, even if you have NO EXPERIENCE remodeling or transacting houses, you offer yourself as an “expert” witness to lawyers involved in the disposition of properties. Only the worst kind of fool would be willing to walk into a courtroom misrepresenting himself as an expert to be qualified by opposing counsel, exposed as a fraud, and likely held in contempt of court. Armando’s logic that “as an investor you are an expert in property values” borders on the comical, and advising others to do such a thing clearly borders on the criminal. Don’t try this at home, folks, you may end up behind bars.
There is also a false presumption that any homeowner suing an insurance company (not a very common thing unless there’s been a disaster recently.) wants to sell their house. Most people want just the opposite - to have their house made whole again. This is a false premise to start off on. Further, he talks of “approaching homeowners with the tack of solving their problems”, which assumes you can even get near a homeowner to do so. People are not stupid and the hordes of fools created by courses like this or foreclosure courses fill mailboxes of people who might have distressed homes and cause a stream of wannabe bottom feeding clowns to their door. After one or 2 such encounters, you’re more likely to encounter a shotgun barrel when the homeowner is sick of being bothered. I know of multiple cases where bottom feeders like Armando intentionally trespassed distressed properties (or properties they erroneously thought were distressed due to getting bad info from 3rd party services - beware!) and were shot dead by homeowners. Bad idea - don’t try it.
Armando also talks of pulling comps on houses and using square footages to determine values. This doesn’t work and is why services like Zillow are worthless. One block over, a certain street can drop property values by ½. You MUST know the neighborhood, houses, and exact features to compare apples to apples, otherwise you are just wasting your time on bad numbers. Comparables are one of the most frequently improperly calculated numbers in all of real estate and you cannot do them like a machine - machine comps are always useless.
Another tactic that Armando recommends when approaching people you should go nowhere near is to tell them that, “That’s why I’m in this business - to help you.” Do you actually think for a minute anyone would believe that? This is a real insight into the mindset of a con man. You’re in this business first and foremost to make a living. Hopefully, if you’re a decent person, you will only do so if you can avoid hurting others and, then, preferably also helping them. If you are only in any business to help others, you are what is known as a charity and likely not intending to make a profit. Don’t lie to people you are trying to make a deal with. They are not stupid and will not appreciate it.
A more important tack you might take with such a person if you have such an opportunity is to educate them as to how to transact a sale with no agents (and no commissions) involved. Of course, Armando doesn’t explain how to do this competently, but it can be done and is very common and safe.
Book 3 ”Fund” 13 Pages
This chapter had literally no good points in it, so here are the negatives.
First off, Armando handles credit like poor people do and it shows. There’s an old saying: “a banker is someone who will give you all the money you want.just as soon as you can prove you don’t need any of it.” Get credit BEFORE you need it, not after you’re on the hook for a property renovation with a gun to your head! Most of his deals are done with hard money lenders . Hmmmmm.. why would someone as wealthy as Armando claims to be have to pay those rates from such usury lenders? I’ll tell you why, because he doesn’t have any wealth. There’s another old saying: If you want to be rich, watch what the poor people do and don’t do it. Hard money is for people who can’t borrow money elsewhere at better terms. I can borrow 300,000 tomorrow at 6% or so, so why would I go to a hard money lender and pay 10 - 20% and several points for the same amount? The answer is I wouldn’t, and neither should you if you don’t have to. For Armando to advise using such lenders just shows that his credit hasn’t improved much since when he was on food stamps 5 years ago.
Additionally, hard money lenders lend on LTV (Loan To Value ratio - amount of loan verses current property value) , not ARV(after-repair value) ARV is speculative and hard money lenders are looking for secured investments. Only with a STRONG track record will they even consider ARV, and then they’ll charge you a bunch more money for it. Banks are even less likely to ever do this. Lenders are not looking to make unsecured or under secured loans, period.
The next tactic of having someone sign over their house on a “subject to” basis is absolute stupidity. Nobody in their right mind will ever sign away 100% of their house unless you pay them the equivalent amount, and anyone asking someone to do so is nothing more than a thief. Someone proposed such a deal to a friend of mine once, and he told me about it. I told an FBI agent friend of mine about it and he took a keen interest. Bottom line: If you take an interest in someone’s property, you must only take title to an appropriate percentage. If you take more, you are stealing from them. Using things like power of attorney to further this is little more than fraud or identity theft. Just the fact that Armando delves into these illicit tactics shows that he is considerably more versed as a grifter and con artist than a homebuilder. I hope you are all starting to get the picture. Lastly, He recommends using green folders to keep records in instead of red so that they will symbolize making money instead of losing it.
Are you fricking joking me? For this information you want to take $100 of people’s hard earned money? Onward…
Book 4 ”Fix” 21 Pages
This chapter had one useful item in it: Driving around to see work in progress IS a good way to find subcontractors, so long as you know what to look for. There is, however, no description of what to look for or what to avoid, and that’s because the author likely has no idea. As such, the tip is, essentially, useless.
Now we start getting into the really improbable. Armando recommends setting up a “Cookie cutter system” to do every flip the same. This is impossible. Ask any competent remodeler. Rarely are 2 houses the same. Completely unrealistic.
Next, he emphasizes speed, speed, speed. This is bad, bad, bad. There’s an old saying in construction: Good, fast, cheap: Pick any 2. Armando’s work is fast and cheap, that’s why it isn’t good and why his houses have been revealed to rarely sell. You can bet anyone living in something he’s built is seriously unhappy.
According to Armando, you will only walk through the property you flip 3 times total. Ever. Again, are you kidding? You shouldn’t even BUY a property you’ve only been through 3 times. This is becoming ridiculous.
He goes on to say that you don’t want to be involved in the work. Wrong. If you are not involved, who is going to be? Unless you have a contractor who can be trusted 100% to do everything, including make critical decisions, you’re in trouble. You HAVE to be involved, or your product will be garbage.
He goes on to recommend retexturing ceilings. Do I even need to tell anyone that this should NEVER be done? Textured ceilings went out in the 80s forever and nobody ever wants one today. Bad contractors loved them because the texturing is easy and hides all kinds of flaws. Can you guess why Armando likes this?
He goes on to recommend pedestal sinks in master baths. Terrible idea because there will be no storage. Pedestals are fine for powder rooms or ½ baths, but not full baths or masters. This is very basic real estate stuff he doesn’t even know. He then says that it should only cost about $3000 to gut and replace an entire bath. Tile alone could cost this much. This is clearly someone who does not know what he is doing.
He goes on to claim he’s been doing properties for 5 yrs (not long) and has burned through 100 subs in 3 years. Clearly, the subs are not the problem - Armando is.
Next, Armando claims that subcontractors have a`shelf life’ of 6 months to 2 years before they must be replaced.. Again, this is totally untrue and just reveals more of his nature. Good trades people are who you want to keep an ongoing relationship with for years, decades, or a lifetime. Treating them like disposable commodities is how you end up when you treat people like dirt, constantly try to cut their prices, and have no understanding of what work they do in order to know it’s value.
Further, Armando advocates using only subcontractors in place of a general contractor.
That’s fine if, and only if, you know enough about being a GC to know whether or not the sub you have charged with that task can do it. If not, you will be in for bad surprises when things don’t work out.
We are also told in this section that any sub should do 2 weeks work per $10,000 expended. This is patently absurd as there is no standard “burn rate” for trade work. To even suggest so is the mark of an incompetent amateur.
Just to take a minute for perspective, if you’re following the Armando method, you now have a project you paid hard money rates for, which you never visit but 3 times total, where there is no GC supervising the work and the disposable trades people who you`ve hammered down on price to the absolute minimum are supposed to be GC ing the job for you. To call this a recipe for disaster is an understatement, and you can now understand why most of the projects depicted on the Montelongo segments of the TV show have been exposed as complete failures. This is flagrant stupidity. But it gets even better - we are also told that, since we are not visiting the site, that we should have the subs (who are running the job) buy digital cameras and take 4 pictures of every room and the exterior each week to send to us so we can see the progress and send their draws. I’m not even going to comment on how preposterous this is. Even with 20+ years experience I would only rely on this method with subs I’d known a VERY long time on a project with which we were both thoroughly familiar, and even then only if it couldn’t be avoided, like if I were on vacation or such for a short time. Anyone thinking they can “phone in” the construction supervision of a house is a fool.
The last gem in this chapter is the suggestion that you “back charge” subs for deficiencies in their work after it has been performed. The whole idea of milestone payments to subs is that you are THERE ONSITE regularly to look at their work’s progress and quality BEFORE you pay them and are always holding back enough to have leverage when you need changes. To suggest that you never come onsite, manage by pictures, and then attempt to collect back money for anything not done properly (which you’d then have to have corrected) is sheer comedy. Go try to get money back from a sub who has completed some work for you - rotsa ruck!
Book 5 ”Flip” 14 Pages
This chapter presents the idea of using auctions to sell completed properties, which is not a bad idea. It is suggested that you have a lender with whom you have a relationship present at the auction to offer instant financing, and this is also a good idea. All in all, the auction concept is sound, but, especially if it is your first time doing one, it would be best to have an expert auctioneer or auction house helping run the show for you. (you can watch and learn and maybe do it yourself next time, and their take is negotiable)
The suggestion of refinancing from a hard money to conventional note is sound, and carrying a 2nd trust before or after via down payment for the buyer is a tried and true method to facilitate a sale.
One thing I would suggest for an auction is to have a professional appraisal and inspection available for potential buyers to see. This will increase their confidence that they are bidding on a sound house of good value.
All in all, this chapter has almost no info in it, and transitions early on into plugging Armando’s $1000 “master course”. The last page of the chapter is a full page ad for the master course with links right in it and suggestions that to get the real info you need to spend another $1000.
I think it’s been pretty well established here that you not only don’t need to spend that $1000, but that far more information is available elsewhere either free or at about 1/10 the cost of the $100 e-book form Armando.
The bottom line is this: If Armando were making money flipping houses, he’d be doing that. He’s trying to sell how-to courses because, as we have seen documented thoroughly now, he doesn’t make any real money in real estate and is attempting to make money as a get-rich-quick infomercial guru. The show is entertaining, but it is not educational and this cast member and his cohorts have nothing to teach you. Where and how people spend their hard earned money is their own concern, but the fact is indisputable that Armando Montelongo has demonstrated next to zero credibility and anyone thinking of sending him their money is well advised to look at inexpensive/free sources of far superior information from known credible sources available elsewhere.
CAVEAT EMPTOR
Mike Voss
contact@hyperion1.com
http://www.hyperion1.com/
Jim FL
03-07-2008, 10:25 PM
I would really be interested in what some of the Subjet-To people on the site have to say about Mr. Voss' review.
The way I read it, it puts the spin on Subject-To investing, etc. as "bottom feeders" which are ethically, morally and legally void.
Did I misunderstand?
Tim
Tim,
I've heard this before, from several folks.
When buying subject to, and using my land trust method, some of these naysayers claim its unethical because they view the transaction as 'hiding from the lender'.
And on some subject to deals, sure, we don't call the lender, or send them letters saying, "Hey, we are buying this house, and leaving the loan alive, is that okay with you?".
Why?
Because a confused mind ALWAYS says "no".
I'll not go into a tangent about the ethics or legality of subject to transactions........it's been done to death previously.
However, if you notice my other post today, I'm taking title subject to on some properties in the coming days, and the lender is fully aware.
I did not quote the entire conversation in that thread with the portfolio lender, however, I did have to educate him some.
When we talked about the property we have already, he said something that caught my attention.
I explained how we now owned the place, etc.
He was not worried about that, just wanted payment arrangements made.
However, he did say, "well, with our company, the barrower and the title holder need to be the same, its in the mortgage document, so you cannot hold title in a trust."
I quickly explained how he was wrong, and referred him to his paperwork.
He joked and said, "you know, I've never read one of our notes before, I might be calling you with some questions if you don't mind?"
of course I don't.
I clearly laid out to the lender rep what we do, (buying subject to), and how I can help him etc.
The other thread gives the result.......which to me, kills the argument from Voss and others like him.
Bottom line, the lender sees a portfolio with heavier defaults than previously, and a willing payor who can rectify some of that for him.
Why would they not take a ready made solution that saves them money, or loss, and brings accounts back into performing status?
When someone tells me what I do, cannot be done, or that they would never........that's fine with me.
Everyone has their own comfort zone, and mine, pays well, and allows me to sleep at night..........worry free.
I also have a tendency to hear 'this cannot be done', or 'you can't do this', and respond by doing 'it', (whatever they were referring to), several times over, successfully.
A personality flaw for sure.
Take care,
Jim FL
Jim FL
03-07-2008, 11:08 PM
I caught your other post on the local portfolio lenders. The funny thing is, as I'm going through my counties NOD notices in our daily legal news I don't see foreclosures from local lenders. They are all from the big national lenders.
I'm just wondering....what am I missing?
Me too........the lender I spoke with today, has a ton of defaults, and not too many lis pendens filed.
I know the one we just took, last year, would have been filed on by ANY lender, whether large or small, at the 3 month mark, pronto.
However, they did not on this one, and the new lender, was more than happy to work with me.
Can't say as I blame them.
I would have never known about the properties we are looking at thru this lender, that are behind, had the lender not told me...........nothing is filed on any of them in public records.
One, is 6 months behind, but, has equity.
The lender has done NOTHING to resolve it, until now.
I'll take title, once we look at the house and make sure we want it, but ONLY when the lender agrees, in writing, to place arrears on the backend.
The rate is fixed, not low, not too high, but, with the balance as it sits, it will cashflow as a rental.
Why the sellers did not do this is beyond me?
They just want to be done........and I'm happy to accomodate them.
See ya,
Jim FL
vBulletin® v3.8.4, Copyright ©2000-2012, Jelsoft Enterprises Ltd.