The Preachers of Easy Pickings

At the airport Hyatt Hotel in Oakland, the crowd's mood is akin to that of an audience waiting for the big fight scene in a Rocky movie. More than 400 people are squirming excitedly on their folding chairs as adrenaline-pumping music blares from four giant speakers. Suddenly the room breaks into applause as a handsome man in a well-tailored suit jogs down the center aisle. The star of this show, however, is not Sylvester Stallone but an Italian Stallion of another breed: Dave Del Dotto, 35, a self-made real estate millionaire. "How many people want to get rich?" he shouts to the throng, and several hundred hands shoot into the air. For three hours Del Dotto drums the promise of prosperity into the crowd. He tells them they can become millionaires by investing in real estate, even if they currently have no credit, no money and no job.

Del Dotto and dozens of pitchmen like him are inundating television airwaves and packing conference halls across the U.S. with their gospel of "no money down." The seminars and TV programs are teasers for the real product: packages of booklets and tape cassettes that explain in more detail how to start from scratch in real estate. At about $300 and up, these home-study courses have earned millions of dollars for the gurus and probably started a few graduates on the path to success. But many mortgage lenders and real estate brokers, irritated by shaky financing schemes proposed to them by the no-money-down graduates, think the preachers make it look much too easy. Says Mary Burton, owner of a Chicago real estate agency: "People who call in after these seminars want everything. They want a cheap price, a good location and terrific terms. I see it as a waste of time."

Perhaps so, but the no-money-down concept has created an industry in which it is often more profitable to preach real estate investing than to practice it. The pioneers were Robert G. Allen, 37, and Albert Lowry, 58, who wrote rival best-selling books on the subject during the 1970s and early 1980s. An updated edition of Allen's Nothing Down zoomed back onto the best-seller lists last year. Offering dozens of financing tactics, Allen and Lowry were soon so much in demand that they formed companies and hired dozens of disciples to go out and preach the gospel in their place.

The gurus aim their advice at neophyte investors who lack the 10% to 20% down payments required for conventional mortgages. The no-money-down advocates tell their students to look for so-called motivated sellers, people who are so desperate to unload their property that they will go along with a highly leveraged financing deal. One such scheme is what Allen calls the Second Mortgage Crank, in which the buyer of a $100,000 house persuades the seller to take out a new bank mortgage of $75,000. The no-money-down buyer then assumes that mortgage and gives the seller an installment IOU for the remaining $25,000. Persuading sellers to accept this kind of deal is not easy, since many of them would be hesitant to extend so much credit.