New York -- Are you trying to find a cheap house in today's depressed real estate markets? Or hoping to make an investment coup by buying from a seller who's broke? If so, you may have been drawn to get-rich-quick guru Tom Vu, whose cable television "infomercials" tease viewers with flashes of sports cars, fancy homes and sexy women.
Mr. Vu's wealth game, he says, is buying real estate from distressed sellers cheap, with "no cash and even no credit out of your pocket." Wannabe millionaires have been paying an astounding $15,000 to $50,000 to learn his "secrets of success."
But a class-action lawsuit, filed last month in a federal court in California, claims that Mr. Vu misleads his followers. Plaintiff Darlene Hara, a California strawberry farmer, put up $44,000, which was most of her savings, to set herself on the road to riches. After trying his system, however, she and several other students I've spoken with concluded that they'd been deceived.
Denying the charge, Mr. Vu's lawyer, Richard Wheeler, says that Mr. Vu has many satisfied students (I spoke with some) and that Ms. Hara should have worked at it longer.
The Tom Vu system starts with a free "seminar" that culminates in a sales pitch for a $15,000, five-day class. Why would anyone risk such a sum? The hook, the lawsuit charges, is Mr. Vu's promise to back his students financially. If they find a good property, he says, he'll buy it and split the profit with them 50-50.
The course is a boot camp from hell, according to Ms. Hara and other unhappy students. They sit for hours through real estate and motivational lectures, in a chilly room with no breaks for meals. If you leave to go to the bathroom, Ms. Hara says, you're followed and hassled to hurry back.
From time to time, students hit the phones to try to make real estate deals. Mr. Vu's criterion, according to the lawsuit: Offer 25 percent to 50 percent below market value, which you try to secure with a $10 deposit.
Mr. Vu arrives late at night and lectures his students until dawn -- so to hear the master, they have to stay up. They may get only four to six hours of sleep all week. "It's a form of coercive persuasion or brainwashing," charges Ms. Hara's lawyer, Daniel Girard of the San Francisco law firm Lieff, Cabraser & Heimann.
True believers see it differently. Scott Rader of Palm Bay, Fla., says that losing sleep didn't bother him. He also disputes Ms. Hara's view that students were hassled if they left the room.
At the end of three of the seminars, while faith still ran high, Mr. Vu urged his students to invest an additional $50,000 to $65,000 to join the "Elite Inner Circle," the lawsuit alleges, where they thought they'd be working with Mr. Vu directly. Ms. Hara signed on but says she saw Mr. Vu only intermittently.
Once out in the real world, many students concluded that Mr. Vu's fabled system didn't work. Furthermore, if they did find bargains that they thought met Mr. Vu's written criteria, he refused to invest. "He would run from them," says a Vu ex-employee who doesn't want to be identified. "He'd avoid the five-day students at all costs."
Some students pick up small commissions from Mr. Vu -- usually $1,000 or $2,000 finder's fees -- for turning up properties he wants. Scott Rader credits Mr. Vu with teaching him how to make his current investment -- a foreclosed house he bought for 17 percent below its modest asking price. But Mr. Rader used his own cash and credit, with no backing from Mr. Vu -- which, says Ms. Hara, is exactly the sticking point. She'd never have given Mr. Vu her savings, the lawsuit says, if she hadn't believed that he'd be a partner in the deals that she found.
Tom Vu declined to be interviewed. Mr. Wheeler concedes that since the five-day classes began in 1989, Mr. Vu has entered into exactly one partnership deal with a student (an office building) -- a fact that prospective students aren't told. That person, Glenn Singer of San Jose, Calif., expected to be a millionaire. But after struggling unsuccessfully to do other deals, he ran out of money and had to sell his house. When he asked Mr. Vu to buy him out of his partnership share, which Mr. Singer thinks was worth $50,000 to $75,000, Mr. Vu paid him $20,000. "I was a little disappointed," Mr. Singer says.
Mr. Wheeler says Mr. Vu isn't giving classes now, because of an investigation under way by Florida's assistant attorney general, Mark Barnett.
For real estate investment advice, try your bookstore. It's a heck of a lot cheaper.