In yesterday’s Arizona Republic, is a section called Investor’s Corner. (No link available to yesterday’s article)  The section is written by Mark Bosworth, who is described in the article as a Real Estate Expert and Phoenix Resident.  He answered the following question:

I want to get into real estate investing, but I don’t know where to go for advice.  What is the difference in expertise and cost between an investment advisor and a real estate agent?  Is it worth saving the money just using my regular agent?

 Here is part of his answer:

I get this question a lot, especially after a round of seminars.  It’s humorous to watch the people who come to my seminars, try to take my investment strategies and then use "Uncle Bob" to invest in properties.

The reason I think it’s so funny is that quality real estate investment coaching and investment services shouldn’t cost you a dime.  How’s that for affordable?

There’s no need to spend thousands on training systems, books and seminars.  Find a good local investment expert and use their services.  For FREE.

As you invest the sellers will pay for our advisor’s time. 

Here is where I take exception to with Mr. Bosworth.  If the seller is paying a cost for Mr. Bosworth’s time, that leads me to believe that if I didn’t have to pay for Mr. Bosworth’s services, I could eliminate that cost, and save money.  Now, while it is possible that Mr. Bosworth’s expertise could help me find me a deal that I wouldn’t find on my own–making him worth the cost–it is inaccurate to state that his services WON’T COST ME A DIME.

I went to Mark Bosworth’s site.  He has advice on a number of topics, but here’s some advice that concerns me:

Appreciation is the biggest return on my real estate investments. This is also the most speculative of the returns. However, what reasonable person do you know that thinks home values will be lower in ten years than they are today? Sure, they may slow down for a little bit, but the historical trend is upward growth. Even if all they do is keep up with inflation I’ll show you how to make massive returns investing in that growth.

It’s called leverage. And while it’s not a direct investment return, it is the principle that slingshots the actual returns into ridiculous numbers. Let’s say that your investment appreciates at 4% (very conservative historically) and you get at least 1% in tax benefits (depreciation). Doesn’t sound so appealing, does it? The key is that you probably didn’t pay cash for the house. Let’s say you bought the house for 10% down. That makes your actual return 50%! Safely and conservatively! I didn’t factor in debt reduction and cash flow because that introduces complexity to the equation because of the debt burden…but that’s part of what is so cool about real estate. Increase your debt, increase your leverage, increase your overall returns.

It doesn’t really matter what "reasonable people" think will happen to home values.  Values can, and do go down.  While it is true that prices generally recover in ten years, there is the danger that you may not have sufficient income generated from the property to carry it that long.  People have become wealthy using leverage– but some of them have found themselves in bankruptcy in declining markets, because they were too leveraged to service their debt.

So who do you believe?  According to the header in the Republic, Mr. Bosworth "personally owns more than 50 million dollars in residential and commercial real estate."  All kinds of real estate agents will be happy to tell you that they can help you out as well.  If you are reading this, you are hearing about the market from the bubblehead perspective–so what do you do?

Again, I take exception to Mr. Bosworth.  Here’s more advice from the website:   Find someone locally who is doing what you want to do and has what you want to have. Do NOT take your advice from someone with just theories or past experiences. You want to find someone who is doing it today and who can show you what they do.

My advice:  Having only one "someone" for investing advice isn’t enough.  A look at history shows that fortunes have been won–and then lost–because a strategy that may have worked at one time, doesn’t always work everytime.  Maybe you can achieve wealth working with Mr. Bosworth, or someone like him–but you will always be safer when you are an informed investor.  That’s true if you are only purchasing your own residence, or whether you have aspirations of becoming a land baron.

Everyone who is looking at real estate now is trying to look into the future– a murky place for even the most careful of analysts.  Remember that most of them make money in the deal, and that might affect their objectivity.  Then there are writers who don’t have a vested interest in your deal–but are prone to the occasional mistake.  (Like this morning’s Las Vegas post!)  Don’t rush to make uninformed decisions–the money you save may be your own!