Granted, it is only the LATimes but Nouveau Riche is at it again. Not content with their successes with their most famous graduate Casey Serin, NRU has decided to double down on their own pyramid scheme. Hey, don't all investment training institues have tubing rivers running through campus? Nouveau Riche teaches that working for a salary is a fool's game; the road to riches requires leveraging debt to amass a portfolio of income-generating properties. Yet investing in rental properties, like all entrepreneurial endeavors, is hard work. A successful landlord has to know the market, maintain his properties, and retain paying tenants.
That doesn't seem to bother Nouveau Riche students, many of whom have seen their neighbors get rich flipping houses or renting them out during the boom. Judging from the callused hands and well-worn work boots spotted at a recent Nouveau Riche event, it attracts a blue-collar crowd for whom the promise of riches from real estate rings true at a gut level that stocks and bonds don't reach. "I know I'm not going to get wealthy working for the fire department," says Hector Magallanes, a firefighter from Los Angeles. "I'm working up the courage to take the risks I need to take to be financially independent."
Ahhh the sweeet smellll of passssive incommmmmme.
50 comments:
First and murst!
Who is at fault I ask you? NRU or the idiots who are paying NRU to succeed and expand?
This is just like the people who complain about gas prices and global warming while they drive SUV's alone.
If people are giving money to NRU, good for them for scamming idiots OUT of their money. Not that I approve of what they are doing, but I am a firm believer in democracy and letting people waste their money as they see fit as much as I may hate that.
BTW, have you noticed how the marketing strategies of the flipping-oriented industry have changed in the past few months?
I accidentally happened to watch "Flip this house" on the A&E channel last weekend. Some clear messages presented during the show:
* This flip happened recently, around March '07 [calendar on the wall]
* Even a moron can flip a house [flipper in charge was an intern depicted as borderline incompetent, working under the direction of an experienced flipper]
* Everybody can make money in a flash [all of a sudden, after a rocky start, the flipper completes the house in 21 days and the projected profit is $80k]
* Even an impending loss is a gain, if you only have some imagination [experienced flipper takes the intern to see a few houses that couldn't be sold for a lot of profit, but were never the less successful investments.
* Don't listen to people who disagree with you, even your family [experienced flipper used to have a company going with his brother, but split because of philosofical disagreements]
The people who continue to feed the masses with this mirage of fast money through real estate investment have no shame!
@serinjustice...
I agree with you that most people who buy into fast money scams deserve to be taken to the cleaners. However, not all consumers have the same level of sophistication to see thru the scam, some out of desperation (think of the old people who refinanced their houses with teaser ARM's, and are now facing foreclosure), some because they really didn't understand what they're getting themselves in to.
I oppose all these plans to save people from losing their houses. It's healthy for the market to see house prices go down, even if it's because of the massive foreclosure numbers.
Having said that, I also feel for the unsophisticated folks who got taken. Perhaps because I myself have been hurt before, not in business but at work. Have you ever been blindsighted in the office, with a co-worker or manager doing harm to you to move ahead at your expense?
@CostaRican:
Yes on every count. I have a brother in law at work whom I helped over and over throughout many years who all of a suddend decided to backstabed me to move ahead and it cost me. So yes, I know.
About the desperation issue: Yes, but that is true of any thing in life. I tried to consul someone out of buying a home with an Interest Only mortgage. They bougth anyways. Today, that house has appreciated over 200k. So right now, today, my advice would be considered bad because they made 200k and would not have been able to buy unless it was for that interest only loan.
In 1-2 years from now, with home prices continuing to crash, their 200k equity will be probably be gone and be left owing more than the house is worth. So my advice will be vindicated and correct then.
Time will tell but my point is that right now, this very moment, my advice is wrong in their eyes due to the 200k equity they have. In the near future, my advice will probably come true when they see themselfs holding a home that is worth more than what they paid AND no end in sight for ever paying off the house.
Got the wrong link there Dawg; the LA Times is the Sacramanto Slavs.
A last chance to get rich in real estate?, Fortune Small Business/CNN Money
Hmm, Russian evangelicals in Sacramento taking action against californication. Interesting but hardly the fault of Nouveau Riche. BTW, any shots of Casey in that protest?
Geez, that article really gives Nouveau Riche a pass.
In 1990, Piccolo says, medical bills forced him to file for Chapter 7 bankruptcy and list debts of $650,539. Piccolo ran into more trouble a year later when he pleaded guilty to the theft of his girlfriend's new Mercedes-Benz. Although he denies responsibility now, Piccolo admitted to the court that he had dumped the car in the desert so that his girlfriend could collect an insurance claim of about $24,000
Once a crook, always a crook.
These days Piccolo is living large - and proud of it. "Only in America," he says, "can a guy who barely made it through college end up owning a college."
You don't own a "college," dipshit, you own a mlm marketing organization.
He and his wife, Mary, own three homes, including a ten-acre ranch with a 22,000-square-foot house and a pool in North Scottsdale. Still a car buff, he boasts a collection that includes a Ferrari 360 Spider, a Lamborghini Diablo, and a Bentley GT convertible. He also travels in a Falcon 200 company jet. For their seventh wedding anniversary he surprised his wife with a cherry-red grand piano signed by Elton John. Cost: $100,000.
Another red flag: beware any company that touts the great wealth of its owner. That's not an advertisement for the company's product, it's an advertisement for starting your own mlm scheme. But the average bozo who comes to the free seminar doesn't connect the dots.
Nouveau Riche reminds me of the scene in "Rubin and Ed", where Ed takes Rubin to the get-rich-quick seminar and . . .
Wait, what do you mean you haven't seen "Rubin and Ed"?
Just read that article, love this bit: Typically, she says, they buy houses for half their appraised value.
OK I don't live over there, but I do know a bit about property. I doubt if that has ever happened, and if it did it was a 1 in 10,000 desperate seller. Anyway, with 50% equity to spare, why no cashback? Casey missed out again?
...The way the Michigan real estate market is headed, it might not be so easy. According to Judy Brant, a broker in Fenton for more than 20 years with Coldwell Banker, the inventory of homes in Genesee County, which includes Fenton, averaged 2,000 units in 2005. Today it is 8,000, up 300%. When Brant heard that Nouveau Riche students had bought 60 condo units in her town - sight unseen - she said, "I'm speechless... [link]
They bought 60 condos in Michigan, sight unseen? BWAHAHAHA!! How about MU? Misnomer University. Breeheehee!!!
This link was posted at CH.C. It reflects the US home prices data as a roller coaster ride.
I loved it!
http://video.google.com/videoplay?docid=-2757699799528285056
NoveauRiche is the new tax for the stupid (before it was the lottery). Seriously though, I think most of these people would rather spend the money and DREAM about being rich one day as opposed to actually being dumb enough (like a certain flipper) to actually go out and try these scam techniques. How many of us have know that friend or relative that does nothing but dream about how they are going to be rich someday..they just have to wait for the right time...Like a certain flipper moron, they regale others with their tales of "Some day I am going to have my private jet and fly us to Fiji..I'm going to have passive income of 100K per year" blah blah blah blah blah...yeah buddy, here take your meds.
Oh, and if one reads the article..you can easily see that NRU is the poor man's version of crisp and cole. Expect to see NRU being investigated real soon.
I'm sure fliptard is crapping his pants right now believing that he is missing out on all those easy gullible NRU commissions. Must suck being on the sideline and not having access to any more money to waste on another get rich quick scheme.
I am hosting a special Casey Haterz cast on Aug. 24, 8:00 PM EST (Friday). A long ways off, but I wanted to do a special 'Haterz Greatest Hits" type of show (one hour presentation and then I take calls):
http://www.talkshoe.com/talkshoe/web/talkCast.jsp?masterId=46224
I often watch Property Ladder and wonder, do they advertise for morons? Occasionally, I see someone with a clue, but usually it's someone who bit off more than they could chew..
I'd love to see a Property Ladder where the buyer did due dilligence, had engineering drawings and prices before he started building, and crew that was ruthlessly efficient..
Unfortunately, I see how little most of the flips make (after labor and carrying costs), anyone with the organization and skills to do it right, can probably find higher margin jobs...
I think most of these people would rather spend the money and DREAM about being rich one day as opposed to actually being dumb enough (like a certain flipper) to actually go out and try these scam techniques.
Interesting concept, but $16k sounds a tad steep for what amounts to entertainment/fantasy indulgence. I bet most NRU "students" attempt to get some kind of ROI from their education --either by suckering in more marks, or by attempting the scams themselves.
Hey buddy, long time no blog. Thanks for stopping in.
It's a little of both. These people more than anything need validation. Sure 80% of the concepts are free in the library and more than half the "network" is available by asking more reputable and more local professionals but these peeople have that "I paid $18k and it is worth it" cachet to prop up their fantasy.
Thay also fall for the MLM component. Even Casey got two more suckers to atend but never got that magical third payday student. I imagine it is that way for most. In the mean time NRU has 3x$16k to work with. If they kick back an occasional $8k no big deal. It's not like getting only $8k for a week of DVD based training and Est regurgitation is a losing proposition.
@Harm
Well I look at it this way. These people want to get rich, but do it the easy way. If they started a business with 16 K, they would actually have to work at it. By "buying" education or information, they can delude themselves into believing that they are on their way to fame and fortune. It's easier to tell the wife "I'm still looking at the numbers and projecting costs" then it is to tell her "I'm at work at the new business while I sit here and watch Judge judy".
You gotta remember, these are people that are spending 16K on something and despite being told "Oh, and bring in more people and you'll make more money" and they still don't get that it is a scam.
What's worse after all..realizing that you are never going to get a better job, home, education,car or family, or spending 16K to daydream and keep you plodding thru life? It's like the lottery, chances of winning are nil, but for that one day before the numbers come out..you can daydream about all the stuff you are going to do with the money.
@ Edgar,
That story quotes Casey Serin as a Hater.
HAHAHAHAHAHAHAHAH
Hey Dawg! China is threating to make the dollar collapse! Yippee!
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/08/07/bcnchina107a.xml
The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation.
Two officials at leading Communist Party bodies have given interviews in recent days warning - for the first time - that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress. Shifts in Chinese policy are often announced through key think tanks and academies.
.....
Oh and off topic but as for reports that there is going to be a major mortgage bailout "What, do you want people to lsoe their homes?"
Let's do it this way.
Disqualify any one with a stated income loan. disqualify any borrower who lied on their application about occupancy status. Disqualify any borrower who took out equity and has recently bought a hummer, gone on an extravagant vacation or has a plasma tv. Disqualify any buyer who bought an investment property as pure speculation, when they were working as waiters, actors, motel clerks, or any other job whre it is obvious they knew nothing about real estate but was joining the band wagon. Disqualify anyone who has bought more than 3 houses in the last 6 months. Disqualify anyone spending more than 30% of their gross income on the mortgage.
Now remember this is only for people CRYING about how broke they are now.
Ok, now if there is anybody left, and it won't be much..yeah what the hell, let's bail out those two people.
Hey Guyz,
It's time to vote for the 6 Degrees of Casey Serin to Kermit the Frog Win-Win Winner!
Woohoo!
"What they teach there is dangerous," Serin says. "They're selling you on getting rich fast-and that's a risky game to play."
JD,
I love this line: "We're going to build a Disneyworld for investors and entrepreneurs."
Yes, he was nutty and got nuttier with age, but Jean Baudrillard essentially predicted this degree of Disney hyperreality/simulacra/whatever decades ago.
Not to mention W.S. Burroughs' vintage Electronic Revolution.
That is what this revolution is about. End of game. New games? Ther are no new games from her to eternity.
END OF THE WAR GAME.
My e key is sticky, but I hope you got the concept of the above quote.
Buy & Hold I - This class is designed to assist students in creating long-term, residual wealth. Students will learn the basics necessary to create a buy-and-hold strategy, from property purchase through property disposal. Emphasis is placed on identifying and locating the resources necessary to make a deal successful and to protect the student’s future interests. Students will analyze closing and financing fees and learn strategies that can eliminate fees and maximize cash flow. [link]
I am waiting for SELL! SELL! SELL! I & SELL! SELL! SELL! II. Badadump!
Robert's Rules of Real Estate Investment:
Rule #1 You make all the money on the purchase.
Rule #2 There is no Rule #2.
That will be $16,000 (each) please.
China is threating to make the dollar collapse! Yippee!
We have a lot of Smoot Hawley's in Congress right now, and some of them are running for president. OTOH, if China carries through with this they damage their best customer and the Comms that run things there will be risking suicide by peasant uprising.
I think it's just posturing on both sides. I hope so, anyway. Are Congress and the ChiComm dictators really this stupid?
Regarding Nuevo Rich University (spelling intended), I predict they will make the national news headlines during the next 12 months.
Classic empire posturing the old empire doesn't know its limitations and the young empire is testing theirs. The Chicomms have $1.3T of pesodollars. They can use half to destroy the US economy and the other half to buy what's left.
The only thing that surprises me is all the people that installed a Democrat Congress wondering how all this could happen. WTF did you think would happen?
NRU will go "David Crisp" witihn 6 months.
Dawg, you won't believe this.
When I saw this post I was very much reminded of my best friend I lost touch with - ages ago who had very similar taste and concerns....
Another thought I had about this was the guy who set it up thought real estate was the way to go. OK, so who does he bring on board as a partner? A successful RE investor? No. A RE professional? No. A property legal expert? No. A broker / finance expert? No. He brings in an MLM expert. Hmm.
What will be sad, and it happened last time round, will be people spending their redundancy payouts on overpriced junk like this in the years to come.
It's crazy to read about these 'investors' at NRU. Seemingly, the only concern they have is positive cash flow. I'm sure the crowd, at these 'seminars', has a few salespeople in it, posing as potential investors. Then they head up to the tables to 'buy' the product. Money doesn't grow on trees, though there are plenty of people that want to believe that and will try anything to prove it.
@DrifterBee
Property Ladder is about the only flipping show I like. The target market of flipping shows is newbies and people dreaming of getting rich quick. Property Ladder shows what happens when these people start flipping houses. Some of them make money, some don't. If you watch the other flipping shows, they always make money.
China is threating to make the dollar collapse! Yippee!
Juding by recent activity in the currency markets, no one is taking this seriously.
Rob -
> The only thing that surprises me is all the
> people that installed a Democrat Congress
> wondering how all this could happen. WTF
> did you think would happen?
Wow - So they accumulated the 1.3 Trillion since the Dems took congress?
The PRC works long term - rarely shorter than 20 year agendas.
Let's be honest here, there is plenty of money to be made in flipping houses, the problem is it takes a lot of patience and capital.
If you can afford to sit around for the perfect house to come along, pay cash for it, pay out of pocket for the renovations, take the time and the money to do the renovations right and then sit on it until you can sell it then yes, you can successfully flip a house and make decent money without a tremendous amount of risk, the problem comes when you go for a sub-prime mortgage and can't afford the carry costs.
Wow - So they accumulated the 1.3 Trillion since the Dems took congress?
No, of course not. I was talking about Congress' posturing and undermining/meddling of international policy and protectionist overtones and wealth redistribution schemes and such. Only 20-25% since the Dems took over. 50%+ by the time the next election rolls around.
@Rob Dawg
Classic empire posturing the old empire doesn't know its limitations and the young empire is testing theirs. The Chicomms have $1.3T of pesodollars. They can use half to destroy the US economy and the other half to buy what's left.
This is not quite how it would go down. First thing to realize is that the sale will affect the exchange or sale price as it is occurring. If you have 10k widgets to sell, the first few may go at your asking price, but successive sales will have to have progressively discounted prices. The sale can go in various ways:
1) Sale of treasuries to buy assets within same currency. There will be no foreign exchange rate shift.. BUT the sales of treasuries will have to be done at progressively lower prices because the sale will exhaust buyers at each respective yield/return rate. The treasuries will have to be face value discounted(ie sold at a net loss to China) to push up the effective yield of the note. This can be fought by the US treasury by increasing interest rates, forcing the sold treasuries to be sold at even further discount. A diff of +1% on a 30year note @ 5% is about a 25% discount on face value (compounding on diff of 5% vs 6% returns). A diff of 2% on a 30 year note is a 43% discount on face value (5% to 7%). The discount that occurs going from 1% to 5% is 69%. I don't think the Chinese realize that they can't sell their 1% treasuries at par to 5% treasuries.
2)China dumps treasuries, converts to local (yuan) currency. You have the same problem as in #1 with the face discounting of the note to increase yield. You also have the same vulnerability to fed reserve moves (pushing yield up 1%+), and as you convert the currency to yuan, you are progressively affecting the exchange rate, making your repurchased yuan progressively more expensive.. further reducing how much money you get out of it. Yes it will devalue the dollar to, which makes Chinese goods more expensive to the US and US goods cheaper to the Chinese.
3)Sell treasuries and move to multiple currencies. This will have the same treasury face value discount and fed exposure as #1. The currency effect would not be as great. It would make US goods cheaper on the international market though.
Either way, dumping treasuries like that would be a good way to turn $1.3T to $600B or less.
If the threat was real, I suspect what is happening in the inner Chinese circles is that the rest of the communist party is telling the person who made that threat to dump $1.3T not to ever do that again. The mere threat can also move currency markets so that they further erode what they get on their sale. I am wondering if what the Chinese are actually doing is the reverse. Get emotions running one way and move in the exact opposite direction.
There are going to be some wicked bargains McKee. There will be what I call "bunnies." Mom has been in the family house for 15 years since dad died and hasn't touched a thing since 1978. The guest bath off the hall is pink fixtures and tiles will sea shells. The popcorn ceiling has little gold sparkles embedded. The built-in over/under oven center is brown and the linoleum is faux morrocan tile of gold and green. The house in the old part of Irvine, or Simi or any of a dozen places. The kids are in Seattle, Honolulu and Alpharetta.
Be wery, wery qwiet. We're hunting bunnies in 2009.
BJ,
Excellent expansion. Yes, you said it better than I. I am also of the opinion that Chicomm will still need the US for a long time in its current position and that while painful the US doesn't need them near as much.
Concern treasuries converted to assets. I don't think they can do any better. We saw what happened when they tried to control strategic assets. Well, okay they went and bought the same thing with a Canadian coat of paint but still. All that's left is the Japanese trap. Rockefeller Plaza all over again. Please.
The ChiComms own less than one trading days worth of T's.
Tank our economy?
YAWN!
As 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.
Full response to "Dean."
Dean's post is full of misinformation and an obvious bias that he makes no attempt to hide.
It truly sounds as though he gathered as much free-floating information as he could so that he might make it sound as though he has first-hand experience. The attempt is to give the nonsense that follows some sort of credence.
I will begin a full response to his post, responding to each one of the numbers individually...however, blogger.com will now only allow 4,096 characters per post.
I will post as much as I can here, but for the full response you may visit http://tinyurl.com/q4sq7p
(if you wish to view a preview of the link and the full URL it can be seen on tinyurl.com at http://preview.tinyurl.com/q4sq7p)
------------------------------------------
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.
--Even if this IS true, a) I don’t know how anyone could possibly “look up” what sort of personal experience any individual has with something as broad as real estate investing…Can you tell me where one might find this information? Perhaps it would be more readily available for a more well-known businessman. Exactly what experience does Bill Gates have with RE investing? How about Rupert Murdoch? Where is this information published?
b) Is it possible that that is a reason neither one of them teaches a single class? Neither individual is listed anywhere as an instructor of any specific course in the course catalogue.
---------------------------------
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.
--Great comment. Spoken like a true lawyer. With that last sentence fragment you get to say almost anything you want before it, and by the end of the statement alleviate yourself from all claims of libel or falsities. You could say the very same thing about almost any business. Depending on how far you’re willing to stretch your claims, you could even say nonprofit organizations "contain aspects" of direct marketing, MLM, a pyramid scheme and a Ponzi scheme...The truth is, Nouveau Riche, like MOST other business is not any of those, other than maybe direct-to-consumer marketing.
First of all, there is nothing wrong, immoral or illegal about multi-level marketing businesses. That acronym "MLM" is thrown around as if it were a terrible thing. Multi-level marketing is a perfectly legitimate business model. But even still, Nouveau Riche is not a multi-level marketing business. Multi-level marketing businesses DO function by enrolling unsalaried salespeople (also
Post a Comment