My son, Michael and I became students of the James Smith real estate investment company in April of 2010 by paying $5,190. The company representatives had been contacting Michael by phone after we had attended a motivational seminar at the American Bank Center in Corpus Christi, TX some months earlier. These promoters convinced Michael he could pay his college tuition and more if we became students of James Smith. We were promised many things including a mentor/coach for 1 year, coaching via telephone, live workshops, and guidance until we made some successful real estate investments.
Although we were quoted a price was $5,000, an extra $190 was tacked on and taken out of my bank account without my permission or a word of explanation. Once paid, we heard nothing from the James Smith Company. I called the investment group several times only to be told someone would be contacting me. [continued below]....
..... Eventually, my call was taken by someone who acknowledged we were students and gave me the name of the person who was to be our mentor/coach. The coach was selected for us because he was supposed to be one of the top coaches at James Smith and he had an expertise in tax sales, an area we were especially interested in. I was told to wait for his call, he would be contacting me.
When I did not hear from this coach, I called the James Smith office again and left a message. Shortly thereafter, a gentlemen named Stanley J. Szukalsk called to set up the times for our coaching calls. He said he would be conducting these coaching calls. Although I resisted at first, believing there had been a mistake and wanting the coach that was specially selected for us, we went forward with the calls. At the end of the third or fourth 1-hour telephone call, Mr. Szukalsk informed me he was contracted for only 6 hours of coaching calls. Until then, I believed he was our 1 year mentor/coach. He explained he was an independent contractor, not a member of the James Smith staff in Utah. He lived in California and was not involved in the rest of the program we had paid for. This was confusing, but we finished our calls with Mr. Szukalsk .
About a month after the last coaching call, I received a call from Cory Woods, a James Smith representative. I thought this was a good sign; we were not forgotten. He was calling to offer me an investment opportunity James Smith was making available first to James Smith students. According to Mr. Woods, the James Smith group had purchased large blocks of bank-owned properties across the country at very discounted prices. The properties had been completely renovated, and they were now being offered to James Smith students at wholesale prices. Some students were even purchasing multiple properties.
Each property, according to Mr. Woods, would have tenants in place with a 1 year lease, a property management company in charge, and a 1 year home warranty. More that once, he mentioned they wanted to use us as a student success story for the company. But more important, we were guaranteed the rental income immediately upon closing. It would be a turn key investment.
I asked if they had properties in my area of Texas. Mr. Woods told me they had properties all over, but there was no need to buy property close to where I lived because all properties were completely renovated, rented with a lease and management company in charge, along with a 1 year home warranty. I would be able to sit back and collect the rent from the management company. When I asked to see some of their listings, Mr. Woods told me it would not be worth it to look at the listings until I had the money on hand. These were cash transactions and the houses listed now may be sold by the time I was ready.
During this time, we were trying to rebuild our home after a January 2010 house fire. The insurance company had ignored much of my claim and had cut the funds so short that it was impossible to rebuild without the supplemental payment. I was forced to hire my own adjuster and later an attorney, then wait for funds to come in. I had explained to Mr. Woods we were in serious financial straits and had been forced to sell major assets to stay afloat. I told him we had been waiting for several months for about $50,000 in insurance proceeds for the contents we had lost in the fire. Since we were at rock bottom, we wanted to use this capital to begin rebuilding our finances. I felt confident telling Mr. Woods all of this since we were James Smith students. And I believed this solicitation was all part of the guidance and mentoring we had paid for.
Mr. Woods continued to contact me every few weeks until I received the money sometime in January or February 2011. At that time, he turned my file over to an in-house James Smith real estate agent, Rian Nelson.
Mr. Nelson informed me he represented me, the buyer, and only the buyer. He gave all the same guarantees Mr. Woods had and assured me this was a safe and profitable turn-key investment; all I needed to do was pick a property. The only properties he sent showed me were in Kansas City. When I asked about other places, Mr. Nelson said that he may have others coming in, but Kansas City was the better investment due to property taxes and prices. So, I got Kansas City.
After showing interest in a property, Mr. Nelson told me that it was a great choice. The property had the best renters of any of the properties. They paid on time every month, and were just great renters. Mr. Nelson repeated his praises of these tenants in several other conversations. Shortly before closing, I learned the owner of the property was not the James Smith group, but a man named Max Greenhaigh. After I had pointed out the lease was up, Mr. Nelson called me to ask if I wanted the owner to renew the lease or if I wanted to negotiate a new lease with the tenants. He suggested that I allow Mr. Greenhaigh to get a new one year lease, giving sound reasons. I agreed.
Believing I was investing in a turn-key property, completely renovated with a warranty, some great tenants and a new one year lease, I wired approximately $37,000 in cash to close on the deal. Once we had closed, I tried to contact the tenants, but the phone numbers Mr. Nelson gave me were no good. He gave me another number. It was no good. I got no response from my letters sent to the tenants. After I contacted the managements companies Mr. Nelson had suggested, it became apparent I had given everything I had to purchase a decaying, dismal property situated in an area with one of the highest crime rates in the nation, a thousand miles away, and no means to save or mitigate my damages.
After visiting the property, neither of the two property management companies were interested in managing the it due to its poor condition and state of disrepair. Both companies sent a description, stating it had not been renovated any time in recent years, and forwarded photographs to back-up their assertions. When I wrote Mr. Nelson about the horrible condition of the property, he told me to take it up with Max Greenhaigh. I did not know Max Greenhaigh, but I did have a special relationship with Mr. Nelson. As the realtor, representing only me, the buyer, and as a James Smith representative, teaching us the nuiances of real estate investment, I believe we were misguided and taken advantage of. Once we handed over the money and the sale was final, the James Smith group forgot us.
Hoping to mitigate our losses, I contacted a local investor for help. She put me in contact with a Kansas City investor. He videoed the property, and after conferring with a colleague, estimated the property to be less than $10,000. He said there were dozens of properties in similar condition in that general area that were selling for $4,000 to $6,000. I was contacted by another investor who estimated it would take at least $20,000 to rehabilitate the property. It needs to be cleaned out (approximately $1,000), then a new roof, new wiring, broken out windows replaced, rotten wood replaced, new sheetrock, and more. Of course these defects were not shown in the listing photographs. A clean white board was placed over the front window to cover up the fact that half of it was broken out.
At the present time, the property taxes are overdue and no insurance company will issue a policy on it. This is an enormous problem for me. Not only is the capital gone along with the possibility of it generating any income, but this property is a substantial liability.