Quote:
Originally Posted by Farrell
Hello-
I'm a new member to the site. I happened across Early Retirement.org the other day when a friend who frequently invests in my real estate company asked my opinion on a company that was guaranteeing 18% returns, an obvious red flag. As I searched the entity making the claims I came across a thread from this site where most all the contributors to the subject were right on point- as a return that high is unlikely sustainable and certainly can't be guaranteed. I am proud of the fact that I have over the last 25 years produced well above average returns that are collateralized by real estate in the economically sound central Iowa market. It was encouraging to come across a site where the members recognize the difference between realistic and unrealistic claims. Which leads me to the question-what besides pie in the sky returns coupled with implying a guarantee throws your radar up? I always scrutinize the core collateral and durability of an asset. Glad to be a member- thanks!
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I'm pretty sure I've heard lots of radio commercials for the firm you're describing. They start with "If you're not earning 18 - 21%, you're losing!" I once did some research on that company. Apparently they renovate buildings on the east coast, and sell off units, and require their investors to put a small down payment (like $10k) and get a loan in the investor's name to buy the rest of the condo. And I believe the 18% "return" is the leveraged return on the $10k down payment. So if I put down $10k, take out a loan (for which I'm fully liable) for $300k, and earn $1,800 profit in a year, then I've earned my 18% return. Definitely not a risk I'd take.
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