Thursday, July 08, 2010
If you are interested in business / investments, the #1 lesson to learn is that, if someone presents an opportunity that seems too good to be true, walk away, or at least get your guard up. If it is so good, why are they sharing it with you?
Here is an example: Yesterday, I got an email talking about the "world's best investment" - better than stocks, bonds, real estate, etc. The guy who sent it provided a link to a video.
So, I watched the video. He followed a predictable formula:
1. Selectively chose examples to criticize normal investments - in this case 2008, when stocks, real estate, bonds, and even TIPs (inflation protected treasuries) were all down. He also mentioned how the returns for stock indexes were negative from 2000-2009.
2. He then described his "perfect investment" - in this case, "being your own bank" by buying used mobile houses at wholesale, and re-selling them at retail with financing. Ex: buy mobile home for $7,000 and re-sell for $10,900 with a 72 month lease. So you would receive about $117 per month for 6 years. His rationale for this working is that banks don't want to finance used mobile homes.
He said that these deals can make a double digit return in any economic environment, and mobile homes are easier to sell then regular homes. They are considered to be like cars (sold through "pink slips") rather than real estate.
3. Finally, he made his pitch: his company would handle everything - locate a mobile home for you, negotiate with a trailer park, advertise the mobile home for sale, screen buyers, etc.
I quit watching at this point.
Think about it - if his company is set up to do the drudgery work, and buying/re-selling mobile homes is the "perfect investment", why would he go to all the trouble of emailing people about it and letting them make the returns, while he just collects a fee?
Clearly, he must think servicing mobile home investors has a better risk/reward than actually investing.
It's like the California Gold Rush - people rushed out there to discover gold and most failed. But Levi Strauss got rich selling jeans to them.
Does this mean that buying / re-selling mobile homes is a scam? Not necessarily. Someone might be able to generate a good return, but I doubt if it is that easy.