It’s nearly midnight, and the energy is slipping from the 400 people inside an auditorium done up like a Spanish mis- sion in Riverside, California. 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.”
No guarantee that end will terminate in six zeroes. Montelongo, the one-time star of A&E’s Flip This House, offers scant proof the formula has turned his “students” into plutocrats. Asked to provide successful seminar alums, Montelon- go 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 ($1,497 per couple) and, ﬁnally, a third: A three-day extravaganza like the one I attended ($40,000 for two). Montelongo claims his San Antonio, Texas, company will rake in about $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 percent of the enterprise). By that same yardstick, his business is ostensibly worth $80 million. Add that to cash and traceable real estate (discounted 65 percent 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 mould 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 criticised, then don’t do anything great with your life.”
The seminar company rates an F from Better Business Bureau (BBB). “You don’t get anything substantive,” complains Lori Jakubowski, a realtor from near Pebble Beach, California, 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, Texas. “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 because of the exacting terms of the contract, which each attendee must sign. It absolves Montelongo 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, New Jersey. “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 gruelling 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 percent 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.