It’s nearly midnight, and the energy is slipping from the 400 people inside an auditorium done up like a Spanish mission in Riverside, Calif. Despite hours of yelling, dancing, massaging and hugging his way through the first of a three-day wealthfest, Armando Montelongo, the 42-year-old minister of get-rich-quickdom, real estate edition, senses the lull. He bounds up the stage to lead a rendition of “YMCA,” but not before remarking to me, “It’s a little more f—ed up than you thought, right?”
Yes, it is. Armando Montelongo Seminars offers long weekends of questionable advice, raucous showmanship and tours of foreclosed homes in some of America’s poorest sections. His secret formula: Go deeply into debt to buy distressed properties, fix them up minimally and sell them quickly. “People throw money at me to become multimillionaires,” Montelongo, a large, stocky guy with shoulder-length black hair, tells the crowd. “This is the means to your end.”
“The most sought-after real estate expert in the world!”: Armando Montelongo has created a cult of self.
No guarantee that end will terminate in six zeroes. Montelongo, the onetime star of AE’s Flip This House, offers scant proof the formula has turned his “students” into plutocrats. Asked to provide successful seminar alums, Montelongo serves up two–neither has made millions. Billy Godsey declines to detail his finances. Jake Leicht claims he’s made about $180,000 in 16 months buying 18 homes.
The one certain multimillionaire to emerge from Montelongo’s seminars? Montelongo himself. His formula is simple: First, expose people to his system through a 90-minute free seminar. Then funnel them into a second (cost: $1,497 per couple) and, finally, a third: a three-day extravaganza like the one I attended that runs $40,000 for two. Montelongo claims his San Antonio, Tex. company will rake in an estimated $100 million in revenue this year from 350,000 people attending one of 3,580 events. That’s up from 57,000 folks at 120 seminars, generating $12 million in sales in 2009, its first year of business. If Montelongo’s numbers are accurate, and his margins are typical for this kind of thing, then he will personally pocket $50 million this year (he owns 100% of the enterprise). By that same yardstick his business is ostensibly worth $80 million. Add that to cash and traceable real estate (discounted 65% for debt) and Montelongo has somehow built a fortune of $200 million or so from telling others to borrow and speculate.
Who is this guy? You get the official picture watching old episodes of Flip This House and Montelongo’s 28-minute infomercial (“The most sought-out real estate expert in the world!”) or reading parts of his book, Flip and Grow Rich (a play on Napoleon Hill’s motivational classic, Think and Grow Rich). The self-created narrative is that he grew up in San Antonio and that at the age of 16 his father’s construction business went poof in the real estate bust.
The biopic always cuts to 15 years later, when Armando is married with a young son but suffering hard times–foreclosed on, relying on food stamps and living in the garage of his in-laws. That year a mold scare in Texas depressed home values…and helped give Montelongo an idea: start buying (and selling) distressed properties. He borrowed $1,000 from his dad and never glanced back. Three years later–presto!–he was a multimillionaire.
You get another view by following a long trail of complaints. Two years ago the Texas attorney general’s office launched an investigation into the seminar’s practices. Settling the case without admitting any wrongdoing, Montelongo agreed, among other things, to refrain from any “false” claims, to give “conspicuous notice” that the free seminar is a vehicle to sell goods and services (CDs, books and DVDs), and to provide prompt refunds. Montelongo shrugs it off: “If you don’t want to be criticized, then don’t do anything great with your life.”
The seminar company rates an F from the Better Business Bureau. “You don’t get anything substantive,” complains Lori Jakubowski, a Realtor from near Pebble Beach, Calif., who paid $1,500 for two sessions. “There were a lot of people who were unemployed just looking for some easy way to make money. And I felt like an idiot because I was right in there with them.” Of the 150-plus complaints received in the last three years, most grumble about the product, misleading advertising and slow-to-nonexistent refunds. “In 2010 and 2011 they just ignored the complaints,” says Carrie Hurt, CEO of the BBB’s branch in Austin, Tex. “Now they’ve started responding.” Sometimes with a smirk. Says Andy Moon, Montelongo’s corporate attorney: “You know the BBB is based in Austin, which is very liberal and in the consumer protection capital of the world.”
No alum is currently suing. Perhaps that’s because of the exacting terms of the contract, which each seminar attendee must sign. It absolves Montelongo and his staff of liability for any “financial, investment, legal, accounting or other professional services or advice” they offer. “It is your sole responsibility to seek independent advice from professionals of your choosing.” No financial advisor could get away with that. “They can’t attempt to disclaim liability for their advice,” says Mark Astarita, a securities and corporate attorney in Verona, N.J. “They need to stand by their advice. That’s what they’re paid for.”
So what are customers paying for? Exposure to Montelongo (though he seldom attends seminars) and his formula for success: how to find foreclosed properties, finance and rehab them, how and when to sell them. Or so it’s billed. Over three grueling days you get some practical advice–much of which can be found in Flip and Grow Rich (used copies recently sold for as little as 25 cents on Amazon.com) or Flipping Houses for Dummies ($8). (“Books are a starting point,” says his spokeswoman.) The key is Montelongo’s 65% rule, which determines what to pay for a wreck and still expect a profit. In his example a house worth $100,000, after repairs of $20,000, should cost you no more than $45,000. Take good notes at the speed of a stenographer, because there are no handouts–and no scheduled breaks. You may lose out on a tip if you go to the bathroom.
“Do you know what numbers they’re talking about?” Mary, an Air Force widow, asks me. Frances and her husband, an elderly Las Vegas couple, have trouble hearing over the noise during a quiz on housing prices and move closer to a staffer in a strained effort to read his lips.
There is plenty of noise over the three days–loud music, along with fist bumps from staffers and so-called millionaire hugs. “There’s a direct correlation between how much you respond to Armando when he tells you to get crazy and how much money you’ll make from the program,” says Jordan Odiorne, the company’s COO–and Montelongo’s nephew. The exact connection remains a mystery.
In fact, over the three days the crowd gets Montelongo for, maybe, 60% of the time on this tour. Volunteers–Armando groupies–lead the house tours. Most are seminar alums who now fancy themselves real estate investors. They take 50 or so people into depressing fixer-uppers, four a day.
Places like the four-bedroom, two-bathroom ranch house with a broken picket fence in Highland, Calif. Brown grass crunches underfoot; eerie gray splotches stain the blue clapboard. Step inside to see fist-size holes pocking the walls. Across the kitchen and living room, the former owner spray-painted profane messages to his ex-wife. The home is listed at $141,000.
Entourage members Raul Mateos and Mark Perez work through the rooms, hustling everyone forward. They suggest making quick guesstimates of repairs and pass over details. What’s covering that window? “I have no idea, man,” says Mateos. “Just patch it up.” How to make the floors more attractive? “Ask your Realtor what’s common with your area,” Perez advises.
Among the most practical tips: Rehab roofs and walls as needed; fix any distressed wiring or heating and water problems; focus your limited budget on the bathrooms, kitchen and bedrooms; replace broken toilets and appliances but not the fridge; use beige paint for walls. “If you’re in a highly Hispanic neighborhood and there are plastic flamingos in the yard, leave them,” says Montelongo. “You can buy a house in a war zone if you know the house across the street moved fast”–within 90 days.