Who Is Robert Allen?
Robert Allen is a real estate investment guru whose name is ubiquitous, thanks to his books, seminar appearances, websites and flair for self-promotion. Allen is best known for his attention-grabbing claims about the infallibility of his method. He asserts, for example, that he can take people out of unemployment lines and make them successful real estate investors. He has also said that, with only $100 of spending money in his pocket, he can arrive in any city and immediately start buying properties with no money down.
The Robert Allen Method
Allen's real estate investment method boils down to three basic principles:
1. Identify distressed properties. Allen explains many ways to do this. He counsels real estate investors to seek out sellers who are so anxious to sell their properties that they will surrender their equity. He also suggests that investors immerse themselves in the foreclosure market in search of properties being sold for less than market value.
2. Employ creative financing to acquire these properties with no money down. The "nothing down" method might involve getting a bank loan, agreeing to offer other assets (cars, boats, etc.) in place of a down payment, borrowing down-payment money from a partner, obtaining seller financing and using other tactical methods that Allen details in his books and seminars.
3. Resell at a profit.
Allen devotes much of his energy to explaining how best to achieve the first two goals. Interestingly, he doesn't dwell as much on the third, as the tacit assumption in his method is that real estate will always sell at a profit.
Does It Really Work?
There is no question that the Allen method works. Buying properties on the cheap with other people's money and flipping them for a profit is, after all, a precise description of the approach used by great real estate investors, including $6 billion man Sam Zell. The real question is not whether Allen's method is sound but whether it is readily practicable by ordinary people in ordinary circumstances.
Allen's method was tailor-made for the booming real estate markets of the past two decades, when it was almost impossible not to make money in the field. The "nothing down" method was enabled by banks and other financial institutions that were eager to finance deals without even checking a borrower's paperwork, and there was always someone else willing to pay more for a recently purchased property.
The method is not calibrated to a real estate downturn such as the one that began in the US in the summer of 2005. In a downturn, the opportunities to buy distressed real estate increase, but the opportunities to do so with other people's money and to turn a quick flip decrease. In a downturn, the people who make money are those who have the liquidity, leverage and patience to buy properties and wait as long as a decade or more to profit from them. This is not achievable for the average personal investor, who must turn a quick profit to stay liquid and remain in the game, or otherwise keep tapping gullible banks, investors and partners for investment money.
Allen promises fast wealth (his books include The One Minute Millionaire). His method offers no special guidance to the long-term real estate investor, and he makes a number of assumptions about the availability of credit and the eagerness of speculators that are simply obsolete in the current market.
The Allen Marketing Machine
Contacting Allen is not hard. He runs several websites (including his flagship site, www.robertgallen.com) and regularly launches e-mail campaigns to draw new investors to his seminars. This frenzied marketing leads some people to take Allen less seriously as a real estate authority and to conclude that he is more of a professional self-promoter. Allen does not help his cause by making grandiose claims about his method; for example, one of Allen's marketing tags is that he creates "a lifetime of unlimited wealth" for his followers. Besides the obvious fact that there is no such thing as "unlimited wealth," Allen's marketing assertions are somewhat compromised by the fact that he filed for bankruptcy in 1996, and he does not appear on any list of America's wealthiest real estate investors.
The gist of the Allen method itself is easily gleaned from Allen's website and from online reviews of his seminars; investing thousands of dollars to learn more about it is unnecessary.Photo: ©Big Stock Photo
At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.