Hi All,
Recently, I got introduced to something. I was interested in it until a good friend went out of his way to deter me from it. Because he did this, I decided to do a little due diligence just to be sure before I leveraged my life to do this program. I’m going to copy the letter I sent to the guy who tried to recruit me into this program, as well as his response so that you guys can check the info and links I found on this company in case you or anyone you know is ever exposed to this “opportunity.” I wanted to make sure that when I researched them, I found information from sources other than them, or people or affiliates involved with them, because they have saturated the net with their own testimonials, news stories and the like about the “opportunity” they offer. You’d have to dig a bit to find any outside sources, which I did. I think CNN is a well respected source of information as well as wikipedia, so I have referenced information I found on those sites. I will make a few additional comments at the end…and be forwarned…this is a long post.
Hey Guys,
I did a little research for the purposes of due diligence, and I think you should see what I found:
Leverage through debt
Since “leverage” is so often used as a synonym for debt, let’s review how debt leverage works in a common financial transaction–buying a house. Suppose you want to buy a house as an investment, and that the house costs $100,000 (this is a hypothetical example, after all), and you can expect to get about $600 per month in rent from the house. Suppose you were fortunate enough to have the full $100,000 in savings and bought the house for cash. If you sold the house one year later for $110,000, you would have realised a total before-tax gain of $17,200 on your investment, the $10,000 appreciation in the value of the property, plus 12 months of rent at $600 per month. Dividing the proceeds by the investment, you would have realised a yield of 17.2% on your $100,000 capital.
Most people don’t have $100,000 in the bank and even if they did, they wouldn’t want to tie it up in one investment. Suppose, instead, you bought the house by making a $20,000 down payment and borrowed the balance of the purchase price, $80,000, by taking out a mortgage secured by the house. If mortgage rates were 12%, you’d be making payments of about $800 a month, but since those interest payments are tax-deductible you’d be able to cover them from the rental income. When you sold the house at the end of the year for $110,000, you’d end up with a gain of $10,000 (assuming the rent just covered the loan payments), or a gain of 50% on your investment of $20,000. If you’d had $100,000 with which to play the market, you could have bought five houses this way and wound up the year with a gain of $50,000 compared to the non-leveraged gain of $17,200.
This is debt leverage, and it works the same in real estate, trading stocks on margin, or taking over companies in leveraged buy-outs. If it’s so neat, why doesn’t everybody do it? Because leverage is a double edged sword. Debt leverage simply magnifies the effect of changes in price compared to your original investment. If the market moves in your favour it works to your benefit; if the market moves against you, your losses are magnified and may total much more than your original investment. In addition, once you assume debt you are committed to making the payments on it–if you miss a payment you can lose everything, so you must be very confident of a continuing flow of cash to service the debt.
These aspects of debt leverage have given it a well-deserved bad name. So many economic cataclysms, business failures, and personal bankruptcies have resulted from debt leverage that its enthusiasts tend to be the lucky and its defenders those with short memories.
The thing I noticed in the seminars, was that while a few of the instructors acted like they wanted to jump on “deals,” they all said they weren’t doing deals “because they had too many coming across their desks, and they were too busy working for the university.” They didn’t need to do deals at this point was what most of them said, including Bill. Seems funny to me that while they are encouraging others to leverage themselves into serious debt to get into this system, they themselves are making a profit from it and not doing deals. It seems to me that they aren’t doing deals because the market is bad, which is opposite of what they are telling everyone else. Aside from that…I’m interested to know what certification these instructors have to teach what they are teaching. The school is not accredited, and the alleged transfer credits to any other college only amount to 1 transferable credit.
The American Council on Education lists Nouveau Riche under the CREDIT program list of reviewed courses. The ACE (which is not recognized by the U.S. Department of Education [3]) makes it clear that it is not accrediting universities; instead the ACE helps “adults obtain academic credit for formal courses taken outside college and university degree programs”. [4] The ACE claims several of the Nouveau Riche course sequences can be used for transfer credit at major universities, but a full Nouveau Riche University program only provides one credit hour of transfer credit. [4] That information came from this article: http://en.wikipedia.org/wiki/Nouveau_Riche_University
Nouveau riche ( French for “new rich”), or new money refers to persons who acquire wealth within their generation. It is generally used to emphasize that the persons were previously part of a lower economic or social class, and that the acquisition of wealth has provided the ability to do or to have things that were previously out of their reach.
The term can also be used in a derogatory fashion, for the purposes of social class distinction, to describe persons with newfound wealth and who are viewed as lacking the experience, finesse, or taste to use wealth in the same manner as old money – persons from families who have been wealthy for multiple generations. The implication is that, despite their wealth, they are still of lower- or middle-class origin, and therefore culturally inferior. A stereotypical example would be persons with new wealth who spend money conspicuously, aspire to the tastes of their betters, or fail to disguise lower class preference.
One of the examples they gave for this was “The Beverly Hillbillies.” In other words…people too ignorant to know how money works or is used.
My concern is that this is a Ponzi scheme.
A Ponzi scheme usually offers abnormally high short-term returns in order to entice new investors. The high returns that a Ponzi scheme advertises (and pays) require an ever-increasing flow of money from investors in order to keep the scheme going.
The system is doomed to collapse because there are little or no underlying earnings from the money received by the promoter. However, the scheme is often interrupted by legal authorities before it collapses, because a Ponzi scheme is suspected and/or because the promoter is selling unregistered securities. As more investors become involved, the likelihood of the scheme coming to the attention of authorities increases.
The scheme is named after Charles Ponzi, who became notorious for using the technique after emigrating from Italy to the United States in 1903. Ponzi was not the first to invent such a scheme, but his operation took in so much money that it was the first to become known throughout the United States. Today’s schemes are often considerably more sophisticated than Ponzi’s, although the underlying formula is quite similar and the principle behind every Ponzi scheme is to exploit lapses in judgment arising from investor naivete. For more info on a Ponzi scheme, please see this article: http://en.wikipedia.org/wiki/Ponzi_scheme
This setup is similiar to the social security system in that the current workers (new recruits) are paying for the elderly retired ones, but there is really no money there to pay for anyone. The difference with the social security system is that they are not continually recruiting people. But the money is moving in the same basic manner, without any backing…without real money there and available…debt leveraging. And how many years have we been hearing that this system is failing just as it is in every area of the government with the national debt…and there will be nothing for us? Its a rob Peter to pay Paul scheme, and it invariably fails, because the money is just passed around and not really earned.
Plus, if the market bottoms out, which I believe with the current political conditions worldwide is coming, as well as biblical signs…you are left with thousands or millions of dollars of debt. If I trust in God to provide, why would I need to “leverage” my future in this manner? If I really trust God to provide, then I need to trust Him. I don’t need to amass unbelievable debt on a scheme that invariably will fall. This thing is only two years old, but I’m sure it has gotten the attention of the authorities and they are checking into it. I need to see evidence of the legalities of this…that this doesn’t amount to some form of securities fraud as a ponzi scheme is. I would need to see a reliable outside agency or news agent do positive writeups and articles on this, because the only positive press I see is that which is generated through NRU and Jim Piccolo and his associates. I would want to see evidence of deals these instructors are doing right now…not in the past when the market was good. I’d have to see that this institution is accredited. Also…this disturbed me:
“Piccolo retorts, “There is no better time to buy, because real estate is on sale. You can never go wrong with real estate in the U.S. of A.” He admits, though, that he has not bought any property lately.
Raised in Nebraska, Piccolo says he was a poor student, interested more in sports and cars than his classes. After graduating from the University of Nebraska in 1984, he moved to Phoenix and worked in the car detailing and design business. 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 ; Piccolo said she’d complained that the car was a lemon. “I couldn’t bear to see her hurt,” he told the court. After three years probation, his felony conviction was reduced to a misdemeanor.
Not long afterward Piccolo discovered real estate. By the mid-1990s he had stumbled on the idea of consolidating investment seminars, offering students the opportunity to hear several gurus speak on various techniques. Out of that grew Nouveau Riche, which he and a co-founder, Bob Snyder, launched in 2005.
At 45, Snyder is a veteran of the multilevel-marketing business. “I’m good at building teams,” he says, and indeed, he has been teaching salespeople for more than two decades, after being trained by Amway ( amway.com), the global leader in multilevel marketing, in which sales reps are paid not only for selling products but also for recruiting more reps. To date, he has signed up 1,300 sales reps for Nouveau Riche. Working out of their homes, they sell two products: a 15-volume encyclopedia on real estate investing for $3,500 and tuition to the “college” for $16,000. The first five tuition sales don’t yield a commission, but on subsequent ones the sellers get a 50% cut, or $8,000.
How does the company attract customers? It offers free one- or two-day intro classes. According to Andrew Yurasek, an independent regional advisor for Nouveau Riche, at a recent event in Shaumburg, Ill., the company rented Lamborghinis and Ferraris for six of its sales reps for the night so they could roar up to the hotel just as prospective students were filing into the Hyatt. “We want to generate some excitement,” says Yurasek. Among the reps, he adds, were an architect, a housepainter, and an office worker, none of whom have a real estate portfolio.”
This information came from this article: http://money.cnn.com/2007/08/06/magazines/fsb/real_estate.fsb/index.htm
You should read this article, because it talks about what really happens with Investor Conciege deals that look good on the surface, but don’t offer any real guarantees later. I’m sorry, but all of this has raised too many questions in my mind, and I don’t see how they can legitimize answers to this. For these reasons, I think I need to pass on this opportunity, because if I’m really investing in God and my future, I have to trust Him completely, and plan wisely which includes looking ahead to the future, and checking out everything thoroughly. This just doesn’t check out well enough. It may create short term gains and the appearance of wealth, but long term…I see disaster, deficit, and financial ruin. It’s not a risk and game I’m willing to play, because the risks are too high, and the advisors are not willing to take those risks themselves, but are making money off of selling that risk to others who are naive to what is really going on. I realize that you are already vested in this, but I think you need to figure out a way to extract yourself. I’ve heard many money gurus say that whenever you consider investing into something, have an exit plan. I think if you have not created one yet, you need to, because this won’t be pretty when it’s over, and I’d hate for you guys to have a serious financial fall as a result. Remember, what’s glitters is not always gold. Peace and blessings.
Here is this guy’s response (and mind you, this is a brother I know from church). Note the contradictions in his comments.
Thanks for the info. I am glad you are doing your due diligence on what you consider to be a ponzi scheme. NRU has not claimed that they are accredited, nor giving out degrees in real estate investing. Though, NRU has recently became a full fledged university where you can attain your BA or Masters.
Listen, everyone leverages whether it is time, knowledge, money, banks money (mortgages people take out on their homes for 30-40 years), car loans, students loans, etc…
As far as the investor concierge, this is an option for the students of Nouveau Riche to participate in, this is not a requirement. NRU teaches people over 30 strategies in real estate investing from current and active investors that specialize only in what they teach. Go to www.nruniversity.com and due your due diligence there as well and not just from others bad mouthing the company and the owners.
I am sure you can agree and appreciate that everyone has had there fair share of faults in life, and circumstances beyond our control. I know that you can relate to that (here he comments on something on my credit)! We ALL fall short of the glory of God. If you didnt know, Jim Piccolo is a Born Again Christian and a man of faith. I can go on and on and on about assuming why he hasn’t invested in any real estate lately, but not to mention he already owns in excess of over $30,000,000 in real estate, were you aware of that? I do not need to defend him nor NRU because I have done my due diligence in everything and I feel at peace with my decision.
With that said, funny how you should come back and say that you need to only “trust in God only” well didnt HE give YOU a comfort and peace about this entire decision and career change in your life so you can move forward with your ministries? So, why would you doubt His decision, if you received a peace and confirmation about it? This means you do not trust in Him completely, yes or no? This is for you to evaluate.
The numbers in this comany are real, the people are real, the investors are real, the deals are real, I can introduce you to more than enough people who will back up this education and the deals they have going and have closed on because of the knowledge and help this community has and what NRU has to offer. Could your skeptism be a result of what your bank account looks like?
I do appreciate your concern and your input. Unfortunately, this amazing and awesome opportunity is NOT for everyone. I will leave you with 2 thoughts to resignate with you:
1. You be RIGHT and I’ll be RICH.
Sandra, you will either make money with me and my team or you are going to watch us do it.
2. There are 2 types of people in this world, those who make excuses and those who create results. You can either make excuses or create results, but you cannot do both.
In summary,
If you don’t change what your doing now, you better like what you are doing, because you will be doing it forever!
Sounds kinda angry doesn’t he? See, I was trying to avoid a situation wherein he or the other two guys (that I met at the seminar)who I BCC’d this to, would be too ashamed to extract themselves out and run the full course of this thing finding themselves in a jam at the end of it.
However, I don’t think he even checked the links I gave him. I didn’t just give him information that spoke against this company/university. I gave him sources to check out the information. I backed up what I said with reliable sources of information that he could check into and see for himself, but I don’t think he wants to believe that he made the most collossal mistake of his life, because he’s leveraged in on 5 deals already, and has taken a $27K loan for the school.
Sure…he’s just starting to make some money now on the marketing scheme, but that is a short term gain. Long term? It’s gonna hit his pocket hard. Like I said, I tried to help him see this. Then again…looking at his comments, I see why he so desperately needs this situation to work…I see why he needs it to be true. He has so little faith. He’s more concerned about being rich…saying that I’ll be right while he’ll be rich.
Well…if I have to be deceptive to be rich…I don’t need it. I’d rather be right, especially with God because after all…He’s the one who holds all the resources on this earth in His hand anyways, and controls who gets what. I don’t think I need to leverage my life in order to (within my own strength) make something I want to do for God (specifically) work. If this vision He gave me is going to come together and happen, it will be by His power and might, via His resources, and it will happen on His timetable, not mine. And why are these schemers always perpin’ themselves off as Christians? This is why those of us onto and into the real deal with Christ get such a bad name. But I take consolation in the fact that he has his reward.
So…back to plan A. Its cool. But I just wanted you all to be forewarned in case you or your friends start hearing about Nouveau Riche in your neck of the woods. I think God tested me in trust and in my faith…and I think I passed. Peace and blessings.
} Peace and blessings all.
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