The real estate coaching industry has enjoyed a bull run for well over a decade, driven largely by historically unnatural growth in the real estate market on a national scale.
Throughout much of the country, home values have appreciated by percentages far above the historic 3-5% average. At the same time, elected officials have artificially suppressed interest rates to prevent a real estate crash in an otherwise weak economy. While this made it easier to get financing and enabled more upward mobility, it also created tremendous inflationary impact.
Intense activity in the market attracted lots of new players flooding the industry.
Scores of new Realtors entered the scene hoping to reap windfall profits driven by climbing prices, fast closings, and bidding wars, while investors piled on to what they believed would be a “can’t lose” opportunity. Along the way, a plethora of brand new real estate coaches joined the fray, promising to teach any newbie with a few grand to spend on a training program how to mint their own millions.
But the industry has been quietly shifting over the last few years, and most people don’t realize it because the media seems to be doing everything in its power not to raise any alarms.
Today, the national average for mortgage interest rates hovers around 6.77% for a 30-year fixed loan—a dramatic increase from the sub-3% rates that were available just a few short years ago. Underwriting has become considerably more stringent as well, making it harder to qualify for a mortgage even at these higher rates. And while home prices have started declining nationwide, they’re still out of reach for a huge swath of homebuyers.
But it’s not just buyers looking for a home to live in—the same economic challenges apply to investors looking to buy and hold homes as rentals as well. Unfortunately, the rental income necessary to make a deal work often does not align with the acquisition costs in many areas today.
One seasoned veteran in this industry says because of these changes, disaster is looming for many of these coaches, and by proxy, their students.
His name is Joe McCall, and he’s one of the most successful real estate coaches in the industry. His career spans nearly three decades and has a near-perfect rating from his students across multiple review platforms—something that’s almost unheard of among coaches.
He explains, “Lots of people have been drawn to real estate investing following the 2008 crash. I’ve watched a lot of new investors mistakenly interpret their wins in this market as broad expertise, and then use that to teach others how to achieve the same results.” McCall goes on to say, “The problem is that all of their experience came from a market where it’s easy for almost anyone to win. They’ve never experienced a downturn, so they don’t know how to adapt.”
His warning is both bold and dire:
“A lot of coaches are living behind a false persona. Their own investments are failing so they’re trying to make up their losses with revenue from coaching programs, but they’re teaching strategies that simply don’t work in today’s market. It’s a disservice to their students and it’s setting them up for failure,” McCall says.
McCall is one of the few people in the real estate coaching industry voicing these concerns, which he attributes to two things—the impact that real estate can create for investors when executed correctly, and the damage he’s seen come from working with subpar coaches. For him it’s more than business—it’s personal.
“I’ve made my share of mistakes throughout my career, and I’ve taken ownership of every single one. More importantly, I’ve never hidden them because I think they’re part of the learning process. Unfortunately, a lot of coaches present a hyper-curated persona of someone who always does everything right and always profits on every single deal. That’s just not reality, and it gives students a distorted impression of the risks they may face,” he says.
McCall worries that as the real estate market continues to suffer, more coaches—especially those who are highly leveraged and have more to lose, will more aggressively market coaching programs based on an environment that doesn’t exist today.
He believes that will lead to more students making bad deals they can’t get out of, which often leads to foreclosures or bankruptcies, and the implications of this can reach far beyond the individuals involved in the deals.
McCall says that investing hotspots can become financial wastelands as foreclosures pile up in a particular region. At scale, this can drive down the values of all the homes in a geographic area.
This will likely attract the attention of Federal regulators.
The FTC has recently started targeting industries known for bad actors misrepresenting their offerings or even committing outright fraud. I covered one of their targets—business credit, in my last article here. This shouldn’t be surprising because some are honeypots of bad behavior, so regulators can quickly stack up a series of career-making wins by focusing on these industries. It’s low hanging fruit. But as this targeted enforcement activity sweeps through an industry, there will be a lot of collateral damage as well.
I’m generally a small government kind of guy, but in some sense, I think this may be a necessary evil. Think of it like a controlled burn that eliminates the undergrowth in a forest to prevent a more severe wildfire from burning the entire forest down.
The coaching industry has historically operated like the Wild West, but if experts like McCall are correct, that may come to an end soon. Regulatory enforcement will penalize the worst of the worst, and will hopefully either scare the rest into operating more ethically or leaving the industry altogether.