Crystal City, Va. — Jim Hornack, tan, trim, and handsome in his expensive dark grey suit, had our undivided attention as he scrawled numbers on the overhead projector. He was, after all, showing us ``the short cut to riches.'' Just recently, Jim said, he had bought a property with zero deposit (``nothing down'') and walked away a few days later with a cool $27,000 in his pocket. He went through the numbers. I was thoroughly confused, and from the puzzled looks, the 75 or so other people listening to the free introduction to Tom Vu's Profit Seminar were lost as well.
But we gamely listened on - until he told us it would cost $695 ($645 if you enroll today) for his two-day seminar. Before he had finished his pitch, about a dozen people left; others listened politely, but I saw few sign up.
Many people are walking out on the ``nothing down'' gurus. Two years ago, instructors criss-crossed the nation, extolling the virtues of real estate. But bankruptcies, jail sentences, and now tax reform has taken the luster off these ventures.
The best known of the group, Robert Allen, author of ``Nothing Down,'' is no longer giving seminars or writing newsletters, though he does have another book coming out this spring. Last summer Allen Group Inc. closed its doors, and the company with licensing rights to his seminars filed for liquidation under Chapter 7 bankruptcy. A similar organization, Tony Hoffman's National Superstar Inc. filed for Chapter 11. Other groups, like Freedom Financial Reports, started by Mark Haroldsen (''How to wake up the finanical genius inside you), have cut out their seminars in favor of three or four conventions a year.
``There's no market left for `nothing down,''' says John T. Reed, one of its most vocal critics. The people who are left - including Tom Vu and his lecturers like Jim Hornack - ``are defying gravity,'' he says.
Others, like Jerry Varnon, a real estate investor who has been to ``at least'' 10 such seminars, disagree. ``They go bankrupt to clean up their business so there's nobody following up behind them,'' he says. ``But they'll be back in a couple of years.''
The problem had started well before the new tax law, which took dead aim at real estate tax shelters. When inflation fell in the early '80s, so did appreciation of real estate. Mr. Reed claims that inflation must be at least 10 percent before a person can make a profit on a nothing-down deal.
Moreover, he says, people became uncomfortable with the circumstances of such transactions. ``You either have to lie to the lender,'' he says, ``because a legitimate lender won't touch a nothing-down deal if he knows about it. Or you have to take advantage of a distressed seller.''
Nothing down lecturers deny any illegality, though one of Robert Allen's better known prot'eg'es was recently sentenced to 30 months in jail and ordered to pay $1.3 million to a bank he defrauded.
But perhaps the biggest problem was the one I experienced in trying to figure out what Jim Hornack was scribbling on the overhead projector. Namely, it takes a lot of work to master the theories. Observes Reed: ``It's like taking a rank beginner, putting him on a high dive, and expecting him to do a triple gainer with a half-twist.''