Don't Get Burned by Bad Advice

The world is full of well-intentioned people who are eager to offer you advice about investing in real estate. But do they know what they are talking about? Do they possess the experience, expertise and current information needed to advise you intelligently? If not, their advice can do a lot of harm.

For example, if your lawyer sister hasn't seen a real estate contract since she took the Real Property 101 course in law school 10 years ago, she's not the person you need to review your purchase agreement.

So how do you find the best advice? You hire the best lawyer, accountant or other professional advisor you can find.

But then you need to face another thorny issue. Suppose the authority you hired gives you advice that turns out to be wrong? It happens. Some years back, I solicited legal advice on a property transaction. The lawyer I retained gave me advice that turned out to be based on a law that had changed six months prior to the date I consulted him. His slip-up cost me more than $100,000.

So even when you are dealing with experts, don't assume their advice is error-free. (Or free of conflicts of interest, dishonest intentions, etc.)

As I say in my book, Trump Real Estate 101, "I go over every detail with my experts. They're on my team, but I'm the General."

But I do something else too - and this is critical . . .

I put it in writing

During my conversations with experts, I take detailed notes. Then I follow up by writing a thank-you letter. In it, I set a tone of appreciation and thank the advisor for his or her advice. Then I restate that advice, repeat my understanding of the issues we discussed and describe the action I intend to take based on that advice.

This letter achieves three goals:

1. It helps me build the relationship I want to cultivate if that expert turns out to be brilliant.
2. It gives that advisor the chance to correct errors he or she made, or to correct my understanding of what was said.
3. It serves as documentation of the advice I was given, in case it turns out to be wrong.

This letter can be literally worth its weight in gold if a professional's advice results in a lawsuit, a regulatory complaint or one of the other situations that can turn a good investment into a nightmare.

I started this post by warning you not to take advice from well-intentioned people. But if you take the advice I give in this article and put it to good use, you will thank me. That's an opinion I am willing to stand by.

Gary Eldred, PhD is professor of real estate at Trump University, where he teaches The Real Estate Investor Training Program. Classes forming now.