An advisor says TikTok real estate advice misleads and lacks warnings

An advisor says TikTok real estate advice misleads and lacks warnings

  • An online mortgage advisor said one in four TikTok real estate investing videos were “misleading.”
  • Influencers responded, saying they bring critical knowledge to the masses.
  • One of the financial advisors said that the best way to view videos is to “entertainment.”

Pete Muggleston, managing director of Online Mortgage Advisor, said he’s starting to see clients with star-studded notions of what they can afford and how rich they can be by investing in real estate.

He told Insider they were “unrealistic inquiries.”

The company, which matches potential homebuyers with mortgage brokers and claims to have helped more than 120,000 customers, wondered if TikTok was the culprit, with hashtags like #property and #realestateinvesting reaching more than a billion views from users worldwide. .

So Mugleston and others reviewed the popular tips available to the average TikTok user, looking at the 25 creators with the biggest followers under the hashtag #realestateinvesting, and watching the 25 most recent videos.

In results released earlier this month, the company — which has a 4.5 out of 5-star rating on consumer review site TrustPilot — found that 25% of more than 600 video advisors reviewed were “misleading”.

Errors of omission were common. According to the study, the videos do not contain disclaimers of riskier aspects of the property or cautionary tales of losses for investors. Price growth is not guaranteed, homes can require expensive repairs, and interest rates can change on a dime. Moggleston argued that reducing the investment decision to guaranteed fortunes is irresponsible.

Furthermore, the online mortgage advisor said that creators should acknowledge the limitations of their experience and hedge their advice. Not surprisingly, Muggleston also suggested talking to a traditional mortgage broker.

Insider reached out to three creatives invited by an online mortgage advisor. They have opposed the company’s characterization, saying they make the real estate industry more accessible and help people on the path to financial freedom.

Small size simplicity

One of the videos in the study, published by Austin Rutherford (@austinrutherfordo), shows a plan on how to “live for free” while renting bedrooms on a $300,000 property while staying there, a practice known as home hacking.

An online mortgage advisor flagged Rutherford’s post for its lack of disclaimers and oversimplification of the process. Mogleston said similar videos on TikTok may give a wrong impression to regular viewers.

“The small-scale nature of this content struggles to convey complex details about the housing market,” he said.

Rutherford was surprised that its content was criticized.

He said “You only have so much time” on the TikTok video, and even a casual viewer can perceive he’s speaking in broad strokes. “It’s not a (do this) statement, it’s (hello, this is an option),” he added.

The online mortgage advisor also found that nearly 65% ​​of the creatives they analyzed in the study weren’t “transparent” about their qualifications to advise. Clarifying credentials is important, Muggleston said, because influencer opinions can be “easily misinterpreted by younger audiences who lack financial experience.”

Creative people think they help others

Hayato Hori (hayantoo), another influencer studied by an online mortgage advisor, is not shocked by the results but still believes in the value of its content.

Hori, a 35-year-old investor based in California, owns five properties across the country and runs RocketOffr, a company that finds off-market listings for investors. It all started when he bought his first property, a $70,000 home in Memphis he had never seen before, in 2019. He wants to help others take that first bold step.

He told Insider, “I’m just a normal kid who’s been able to buy real estate and I’ve found it’s a really good way to go. I just wanted to share that with everyone.”

Hori admits that on TikTok “anyone can say anything”, and has watched a lot of videos which he considers suspicious of their intent. Because of that, he said, an online mortgage advisor is justified in saying that some content may mislead viewers.

“You got to where their concerns are,” he told Insider.

But author Antonio Cuccinello (@investarters) says the disclaimers and risk analysis that an online mortgage advisor asks for aren’t practical for every video, or even some books. Cuccinello said that videos only seemed to work well if they were “less than a minute,” which – like Rutherford – argued it would be impossible to put everything you need to know into one audio clip.

Instead, he sees its content as a starting point for the casual viewer.

He said: “The dream enters them.” Then they start to get the whole picture.

industry caricature

Eben Burr, a financial planner at Toews Corporation, said that the best real estate investing videos on TikTok are “entertainment.” He said viewers should view influencers as selling their brands, not as personal advisors.

“Speaking in such generalities, it’s almost like a caricature of what the industry is,” he told Insider.

Burr noted that many of these innovators likely started investing during the past 10 years when soaring prices sent all the boats afloat. He worries that “people looking for a dream” may be too late, and that these people may be the least able to bear a financial loss on damaged property or property that they cannot repair. Even worse, excessive risk-taking investment could lead to bankruptcy, he said.

Looking at the bigger picture, Burr noted that people who get into a frenzy via social media are more likely to jump into a real estate project without understanding the full scope of responsibilities.

“Nobody mentions time here, they just mention dollars,” he said of TikTok. “And that to me is the biggest thing you’ll ever spend.”

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