01
May
2008
Posted by Robert as Real Estate, Resources
People often wonder how they can learn to invest in real estate and make money from it. It’s not like they teach this stuff in school. Other than a multitude of books on the subject, there really never was a great centralized resource for an education in real estate investing.Â
Online Real Estate School
Recently, however, I came across Nouveau Riche University, an online real estate school. Nouveau Riche educates its students on how to achieve wealth through real estate investing.  It offers an array of options that help ordinary individuals become seasoned real estate investors. In particular, Nouveau Riche has three very valuable features.
Colleges
First, Nouveau Riche offers its very own “Colleges,” which are week-long instructional sessions held in different locations across the country. The next College, for example, is in June, and Nouveau Riche offers a College session every other month.
Two important features of these Colleges are (1) you can choose from different tuiton packages; and (2) you can select the courses you want to take and when you want to take them. In other words, you’re in control of what you want to learn and can customize your education. (Contrast that with traditional schools, where you generally have no control over what a teacher inculcates you with.) Â
Home Study
Second, if you don’t have time to attend a Nouveau Riche College, you can study on your own schedule using Nouveau Riche’s Residential Real Estate Encyclopedia (the R2E2). The R2E2 is a comprehensive resource that contains 15 volumes of information regarding real estate investing. Â
It covers everything and anything you can think of, including incorporating your real estate venture, buying and fixing up properties, raising money from private investors, etc. Thus, if you’re too busy with work or simply don’t have time to travel across the country to attend a College, the R2E2 is a fantastic resource that allows you to learn at your own pace.
Instructional System Design
Finally, the most beneficial aspect of Nouveau Riche is its teaching method. Nouveau Riche educates its students using a method of instruction called Instructional System Design. This method determines how to teach students what they want to learn and need to know.Â
Most schools and seminars simply explain various investing concepts. At Nouveau Riche, however, the courses are based on practical strategies that focus on teaching you how to do something instead of telling you what something is.  This process includes various investment strategies, working together with other people interested in becoming real estate investors, case studies, and exercises.Â
The best way to learn something is by doing it. And Nouveau Riche gets this exactly right (among other things).
Nouveau Riche offers a unique curriculum of courses and an unconventional, but effective, method of teaching. If you want to become a real estate investor and don’t know where to start, this is the place for you.
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3 Responses
Dean
May 5th, 2008 at 4:04 pm
1As a preface, I joined NRU by purchasing the “Regent’s” package, I went to the “college”, I tried to recruit, I have analyzed the Investor’s Concierge deals, I went to the briefings, I have heard the likes of Piccolo, Snyder, Cheri Tree, Kecia and all the other NRU hacks speak, and I’ve met and talked to many NRU “students”. So please don’t tell me I don’t know what I’m talking about. Here is my assessment of NRU. I have tried my best to be fair. For those of you familiar with NRU, this outline follows the “EPIC” presentation some of you may have been subject to.
The Company
1. Piccolo and Bob “the General” Snyder, the founders of NRU, have MARKETING backgrounds. Look it up. They have no prior experience with real estate investing before NRU.
2. As a consequence of Number 1, NRU is primarily a MARKETING business. You can call it whatever you want, direct marketing, MLM, a pyramid scheme, a ponzi scheme, there may not be a perfect term, but it contains aspects of all of these concepts.
3. Real estate investing and education is an ancillary part of NRU. It is the “product” that they sell, but it might as well be long-distance phone plans, an internet web-based business, vitamins or make-up.
4. NRU’s success is a direct product of the real estate mania this country has experienced over the past 7 years, not anything inherently great about the company’s products or services.
The “Education”
5. For $16,000, you really don’t get very much. You receive a certain number of “college” credits that expire after two years, but the catch is that you have to fly to Arizona to use them and you can only do that four times a year for a one-week period each time. There is an on-line option, but it is sub-par for a variety of reasons.
6. The courses are amateur hour and taught in seminar-fashion. They may dazzle people who don’t have a college degree, but will offer little to those who are generally versed in basic real estate and financial concepts. The educational materials are photocopied, hand-bound booklets, sometimes just an outline of the power point presentation. The instructors appear to be knowledgeable in their field, but they are mainly interested in consulting fees and fees for other services that they offer to NRU members (not altruism as many NRU shills would like you to believe).
7. NRU does not “teach” you anything you can’t learn by spending a few dollars on Amazon.com. There are no secret tips to learn that haven’t been published in the hundreds of real estate books you can buy on your own.
8. The “education” is primarily a vehicle for the direct marketing aspect of NRU, just as Investor’s Concierge is there to give members credibility when they market the course. The Concierge, however, is also another mechanism by which NRU extracts additional money from its students. More on this later.
Real Estate as an Investment Class
9. In marketing the tuition, a great deal of emphasis is placed on how real estate can make you rich. There is little or no information on how risky investing in real estate can be. At the “briefings” (the 2-hour presentation designed to lure new members), the presenter will talk a lot about how great real estate is because of the availability of leverage and certain tax benefits. At several briefings I went to, the presenter would literally make the representation that real estate prices only go up. Finally, the presenter will talk about how terrible it is to work for a corporation and how useless a college education is (ala Robert Kiyosaki). This usually manifests itself in the form of derisive acronyms, such as JOB, which stands for “Just Over Broke”, or how only NRU can give you an MBA that’s worth anything, a “Massive Bank Account” (crowd usually goes wild here).
10. NRU never mentions the special risks inherent in residential real estate investing, such as problem tenants, financing and interest rate risk, structural and environmental risks associated with housing, the cost of maintenance, the prospect of asset depreciation or declining rents, and the risk of litigation including from eviction and foreclosure. Bottom line, investing in residential real estate is very risky and comes with a host of hazards you would not find in other asset classes. NRU discounts all of this and presents real estate as a perpetual money tree.
11. We will likely never experience again in our lifetimes the type of appreciation in residential real estate that we have seen these past few years. There are several reasons that this is very likely to be the case: reversion to the mean, unsustainable public/private debt burdens, massive transfer of wealth to developing nations, slowing economic growth, an aging population, greater regulation in the financial sector, etc.
12. Historically, residential real estate prices have appreciated at the rate of inflation.
13. Real estate, like any other asset class, carries risks that are commensurate with the returns you are likely to generate. For example, leverage is great in good times, but people are quickly learning how easy it is for your equity to get wiped out a result of relatively small declines in home prices.
14. Investor Concierge deals are generally market-rate deals, but they are advertised to NRU students as amazing deals that generate positive cash flow. There are other sites that break this down, but generally speaking, the appraisals are usually 2-3 pages long and contain nothing more than a broker’s opinion of value, the financing is almost always interest only or neg-am, the rents are inflated, and the only way you get “positive cash flow” is if you include certain seller incentives like pre-paid HOA or guaranteed rent, most of which will expire within 2 years. Additionally, maintenance and vacancy will almost immediately eliminate the $100 or so of positive cash-flow a month you may get. NRU members hate talking about the details of the Investor Concierge deals.
15. Typically, there are only 15-20 available properties on the Concierge at any given time, so the pickins’ are slim. NRU encourages you to “reserve” a property you like as soon as you see it online because it could get snatched up by someone else unless you do. The NON-REFUNDABLE fee for reserving a property is $350.
16. Investor Concierge deals are mainly located in historically depressed or undeveloped, sub-urban or rural real estate markets, you will generally not find properties on the system in established, urban markets. These properties are likely to experience declines in this current bear market and will not likely appreciate much at all when the economy recovers.
17. Anyone who has purchased a deal off of Investor’s Concierge over the last two years has either lost all of their equity and/or is underwater. This is a terrifying prospect for many people in NRU because at the briefings, many of them go up to the front and brag about how they have bought 5, 10, 15 or even 20 properties over the past few months. Many of these people are going to have to walk away from their homes in the coming years, which will destroy their credit and eat up any ponzi money they made from the marketing. Anyone even thinking about joining NRU should be asking the ISAs for a detailed breakdown of their current real estate portfolios.
The Marketing
18. The real estate investing component of NRU is used mainly to support the primary business of the company which is selling tuition packages. For an additional $75, you can become an Independent Student Advisor (“ISA”) and can go out and sell the tuition packages on behalf of NRU. There are three options which cost different amounts, but most people are pressured to purchase the most expensive package, the “Regent’s” tuition together with the “Encyclopedia”, which total almost $20,000. There are certain commission and tuition-related perks you get for buying this package.
19. The commission system is what really drives NRU. NRU members receive a 50% commission for each tuition package they sell, so that can amount to nearly $10,000 a pop. Commissions are further leveraged by the requirement that each new person you sign up bring you two additional recruits before they can be “certified” and start collecting their 50% commission, with the commission for those first two recruits going to you (that’s almost an additional $20,000 on top of the $10,000 you already made from the first guy). Then, each of those two fresh recruits that were handed to you also need to bring you two new recruits before they can get “certified” (yes, that’s another $40,000 on top of the $20,000 on top of the $10,000). You see where this is going. Of course, before you can begin collecting any commissions at all, you need to bring YOUR ISA two fresh recruits and get “certified” as well. This “pyramiding” aspect of the commission structure makes it extremely lucrative IF YOU ARE GOOD AT SALES. This is hook that gets most people to fork over the money. If you get out a piece of paper, you will see how quickly you can get to $1 million. Also, the commission structure is subject to change by NRU AT ANY TIME.
20. But even the commission structure has a catch, one that NRU only recently started to be more upfront about. NRU used to present the commission system as requiring that you bring your ISA two fresh recruits before you begin collecting commissions for additional recruits yourself. But if you actually read the commission rules, you will find that you in fact, need to bring your ISA FOUR new recruits, NOT TWO. My ISA sold me NRU telling me I only had to bring him TWO, when in fact, the rules say you have bring him FOUR. His explanation to me AFTER I signed up was that he would “manually” certify me on the system after I bring him two recruits. Well, that’s fine for me, but how the hell was I supposed to sell this thing to others? I could not guarantee that they would all get “manually” certified after two sales because that’s not how the commission rules work. My partner was furious about this, but this is the type of thing that happens when you incentivize people to aggressively market any product. There are other hidden rules as well, one that pretty much requires that you have to keep selling indefinitely to keep the stream of money flowing. Anyone even thinking about signing up should ask to see a copy of the rules on paper before you do anything and read it very, very carefully, because it is confusing.
21. Most people are unsuccessful at selling tuition packages. It’s akin to trying to sell a used car, except you would probably get more value from a junker than the “education” that NRU offers. Most people are simply not good as selling used cars and most people wouldn’t feel good about it either. The problem is that the “education” and other ancillary services are simply not worth $20,000 and it’s obvious why: most of that needs to go subsidize the commission system, which is needed to lubricate the entire NRU machinery. So unless you’re committed to selling and you’re good at it, you’re likely to be very disappointed.
22. The commission system places a lot of pressure on NRU members to sell, sell, sell. This is how all the top “producers” have made most of their money. This also creates a massive conflict of interest. More on this later.
23. The direct marketing aspect of NRU preys on the greed and naiveté of all sorts of people, but mainly lower-middle class individuals, young people just starting out, and real estate agents/brokers, many of whom don’t have a lot of education and work crappy jobs that they aren’t happy with.
24. NRU is tied in with the likes of Robert Kiyosaki and “The Secret”. I’m not going to bore you with the analysis, but try Google and you will find plenty of critiques.
Conflicts of Interest
25. NRU generates tremendous income directly from its students. They make money not only from the tuition, but also from marketing materials and services, credit services, mortgage brokerage services, accounting and legal services, special seminars, Investor Concierge transactions, all of which cost extra, and they’re not cheap. You also have to pay for lodging and the plane ticket to get to the college. All of the NRU instructors also offer consulting deals and other professional services, which also cost extra. The $16,000 for the Regent’s tuition only buys you “college” credits, you get NOTHING ELSE. You even have to buy the forms and brochures you need to sign up people for NRU. I take that back, you do get a tote bag, but it looks ridiculous.
26. NRU members are supposed to be “mentors” to the new members who they sign up, but what they really want from you is for you to sell the tuition to others, because they will the commission for the first few sales you make. There is a huge conflict of interest here because there is a big incentive for NRU members to sell the tuition, irrespective of the quality of the product or the unique situation of people to whom they are marketing.
27. NRU encourages you to sell to friends and family, which destroys relationships when people are dissatisfied or feel cheated, which is often the case.
28. The most distasteful defense of NRU to me is that “it’s not for everyone, but it worked for me”. It may be that there are some people who are successful and make lots of money in NRU, but the system cannot support a situation where most of the people in NRU make tons of money. This is the inherent, mathematical limitations of these types of marketing structures. I’m sure someone smarter than me can prove this. Likewise, the real estate market cannot support most people in NRU making money in residential real estate investing. Case in point is the short sale strategy, which NRU shills tout as the way to make money in a down market. Well, there is so much competition in short sales right now, and even more with each “college”, that short sale investors are bidding up pre-foreclosures pretty much to market. These two fundamental concepts virtually guaranty that only a small minority of NRU members will make any money either from the marketing or the real estate investing, and REQUIRE everyone else to fail in order for the system to sustain itself. This is the biggest conflict of interest of them all and lends to NRU’s reputation as a “scam”.
Conclusion
NRU is a marketing business that encourages and monetarily incentivizes its members to use high-pressure sales tactics to sell a very expensive real estate “education” package with questionable value to unsophisticated people with the lure of quick money and unlimited riches in real estate. Success in NRU is highly dependent on (1) a booming real estate market and/or (2) a unique talent in sales and marketing. What makes NRU so insidious is that it plays on the fear and greed of ordinary people, often friends and family, most of whom will go bankrupt by following NRU investment strategies during a severe and sustained real estate down turn such as the one we are experiencing now, and most of whom will fail in selling the tuition package because they lack the sales and marketing expertise which is further exacerbated by a declining real estate market. Taken as whole, NRU may be perfectly legal, but many people will feel like they were cheated out of thousands of dollars by someone they trusted. If after reading this, you are still interested then by all means sign up. But just be prepared to live with it if at some point you find yourself either financially bankrupt, morally bankrupt, or even worse, both.
Epilogue
Finally, you’re not going to see a whole lot of posts like this from people who have joined NRU. Most are very disillusioned at the loss of thousands of dollars and don’t even want to give it another thought. The rest are out searching for marks. I can only hope that NRU won’t survive this bear market in housing, and if this post can hasten its demise, so much the better. I don’t blame the person who signed me up, he incidentally has had to find a full-time job now since NRU is apparently not doing it for him. I walked into this with my eyes wide open, which shows you how greed can overcome any good judgment you may think you have. But I am thankful that I didn’t end up dragging anyone else into this apart from a good friend as my partner in this scheme, but with whom, as a result of NRU, am no longer on speaking terms. So for all of you NRU shills out there who still think you are doing God’s work, why don’t you try calling each and every person you have signed up and ask them exactly what they think about NRU. I think you will find that my experience is not so unique. If you can keep on selling after that, well then, good luck to you.
Robert
May 6th, 2008 at 9:30 am
2Dean, thank you for your insightful comment. I’m glad you took the time to write all this so that other readers can look it over and make informed decisions. It’s readers like you that make blogs so valuable. Thanks again!
creating wealth
October 29th, 2008 at 4:04 pm
3Real estate can be great for creating wealth
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