One of Fortune magazine’s recent editions carries a story about something called Nouveau Riche University. It is located in the non-French speaking quarter of Scottsdale but they seek students from Tucson and nationwide.

It is presented as a school for prospective millionaires, people who want to get rich quick in real estate. After all, real estate is on sale right now. Fortune was too polite to come right out and say it is a scam. Is it? You decide.

 

For tuition of $16,000, they teach you how to drain all the equity out of your home and invest it in other real estate. Don’t know how to find screamin’ deals? No worries. They will find them and sell them to you. Yes, their affiliated brokerage, Investor Concierge, keeps the commissions on sales as well as fees for management, etc. Probably they will help you sell your investments, too, for a commission. You keep any profit, you bear any loss.

As a real estate brokerage, it is a brilliant concept. Brokers usually have to advertise and scratch for clients. This operation has a group of captive clients to deal with who actually pay for the privilege.

But it gets better. This whole operation is a multi-level marketing scheme. You not only get to sell your sucker $16,000 tuition, but a 15-volume encyclopedia of real estate for $3,500. You, of course, eventually get half of the take on recruiting and sales to new students.

The Internet is rife with experiences of students, most bad but a few claiming exceptional gains. There are also plenty of listings by students trolling for more students to sell the course to. In every such Ponzi-type scheme, there are always a few allegedly successful stars, typically those who got in early when there were plenty of students they could recruit. I call them Judas goats. In case that term is unfamiliar to you, a Judas goat is a goat trained to lead other goats to slaughter.

The show biz aspect of the razzle really showed up one night when a bunch of their stars roared up in their Ferraris to impress the suckers. According to Fortune, the cars were rented for the evening, and these high rollers owned no investment real estate themselves.

Along about now I hope you are asking the classic question, "If these guys are so good at making money in real estate, what do they need me for?" Well, I’m going to tell you.

They need you to suck all the equity out of your home and any other trove of money you might have and put into their real estate deals and pay them their fees. They need you to sign mortgages so properties can be bought at your risk. And mostly, they need you to sell the deal to other students.

Note that you pay all the costs, you put up all the money, you bear all the risks. They collect non-refundable fees and commissions. The "university" assumes none of the risk. Now when this house of cards collapses, and it will as sure as the Lord made little green apples, you can be certain it will not be the owners of the institution who file for personal bankruptcy. You’ll have plenty of time then to read that 15-volume encyclopedia which you are unlikely to complete before then.

Is this school legal? State law (32 ARS 3021) requires such a school to be licensed by the Arizona State Board of Postsecondary Education. It is not. Is it accredited? No. Seven of its courses have been certified for transfer of credits by the American Council on Education, which itself is not recognized by the U.S. Department of Education.

Is this really the way to get rich quick in real estate? For the owners of the school it is. For you, probably not. As they continue to dazzle you, as they get you to throw good money after bad, just keep asking yourself, What do they need me for? You will soon see. Sorry.

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Who would buy real estate in this market?

Nouveau Riche University makes money by getting its students to buy investment property - no matter how scary the market gets.

 

FSB) Scottsdale -- Several months ago Silvia Cuevas took stock of her life, and it was a profoundly unsettling experience. At 40 she had a solid job with a modest salary at the public library in Santa Ana, Calif. She'd carefully squirreled away some savings and bought herself a little house. She was financially secure - and utterly dissatisfied. All around her, Santa Ana throbbed with the feverish energy of recent immigrants eager to cash in on the promises of America. A short drive from Disneyland, Santa Ana boasts one of the highest concentrations of Latinos of any city in the U.S., and these days it is a hotbed of entrepreneurial activity. Cuevas, though, felt as conservative, meek, and, well, dull as a church mouse in Vegas. "I was going nowhere," she recalls. "How was I going to find my fortune?" Then a girlfriend introduced her to Nouveau Riche University.

Not exactly a university, Nouveau Riche offers real estate investment classes -and a host of related products and services - to would-be tycoons. In April, Cuevas plunked down tuition of $16,000 and attended a weeklong program in Phoenix. Two weeks later, emboldened by her instructors and an advisor assigned by the university, she refinanced her home, taking out $200,000 - a large share of her equity. She used the money for down payments to buy - sight unseen in one case - three investment properties through a real estate agency controlled by Nouveau Riche. By midsummer Cuevas' portfolio of investments had grown to include a condo in Colorado, three acres of undeveloped land in the Smoky Mountains, and a three-bedroom house in San Antonio. Her debt load has grown too, thanks to the hundreds of thousands of dollars in loans she took out on the properties, but she doesn't worry. "I learned how to be bold at Nouveau Riche," Cuevas says. "They're the market experts, so I trust them to help me buy. I can't wait to make my next purchase!"

That's the kind of rah-rah spirit visitors encounter at Nouveau Riche (nruniversity.com), where the lectures are more like pep rallies, the tests are sometimes self-graded, and the homework is optional. Nouveau Riche has reason to cheer too. Co-founder and CEO Jim Piccolo claims that revenues will top $80 million in 2007, up tenfold since 2005, when the company was founded and the real estate market peaked. Piccolo makes money not only from tuitions but also from commissions on the properties his students buy and from the fees he charges for accounting, finance, and property-management services.

Remarkably, Nouveau Riche is able to attract huge crowds (a recent class in Phoenix lured 2,479 students) in a market that is declining rapidly. The Standard & Poor's Case-Shiller home price index (homeprice.standard-andpoors.com) shows that nationally prices fell 2.7% in the first quarter, more than in any quarter since 1990. In a late July conference call with analysts, Countrywide CEO Angelo R. Mozilo, who runs the nation's largest mortgage firm, said home prices were falling "almost like never before, with the exception of the Great Depression." That's not all. PMI Mortgage Insurance (pmigroup.com), a financial firm that tracks the market, predicts two more years of decline across much of the U.S.

Given those grim stats, why would anyone want to invest in real estate? Nouveau Riche borrows heavily from the investment philosophy popularized over the past several years by real estate guru Robert Kiyosaki, who wrote the bestselling advice book Rich Dad, Poor Dad. Like Kiyosaki, 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."

Nouveau Riche makes it easy for would-be tycoons to get started. "We learned through our research that most students of real estate seminars never actually buy any property because they don't have the tools to take that first step," Piccolo says, "so we are offering them all the tools they need to build their portfolios."

At a recent seminar at a Hilton in Phoenix, Fix 'n Flip - a daylong course in the art of the fixer-upper - was standing room only. So was Creative Financing, in which students learned how to tap their retirement savings and their home equity for money to invest. Between classes, throngs of students flocked to the lobby to booths featuring affiliates of Nouveau Riche. Save Our Scores (or SOS, as it is called) helps high-risk borrowers boost low credit scores so that they can borrow more money at lower rates. (Fees range from $600 to $1,200.) Investor Concierge, the real estate brokerage firm owned by Piccolo and his associates, helps students buy houses and condos, arranges financing, then provides management services for their far-flung properties. (The firm's slogan: "Click a mouse, buy a house.") Meanwhile, the Nouveau Riche University Store did a brisk business in polo shirts, plus jackets with the college logo, a stylized eagle.

These days alumni groups are springing up in Atlanta, Boise, Tacoma, and other cities. What's on the agenda at their meetings? "We boast about our portfolios," Heather Echevarria, 29, of Boise, says. "We shop deals too." Echevarria and her husband, Ben, specialize in pre-foreclosure properties - that is, buying houses from cash-strapped owners who can no longer afford to pay their mortgages. Typically, she says, they buy houses for half their appraised value. Last year, the pair claim, they bought-and quickly resold for a profit - 75 homes in Idaho and Nevada.

But will other graduates of Nouveau Riche do as well? What happens if interest rates rise and the monthly payments on a variable-rate loan soar, or a tenant leaves? Will the investor be able to sell at a profit in a market where home prices are falling? Casey Serin, a 24-year-old programmer from Sacramento, had already invested in property (although not through Nouveau Riche) before he enrolled in one of its classes last year. "What they teach there is dangerous," he says. "They're selling you on getting rich fast-and that's a risky game to play."

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. About 10% of those who come to the free classes buy the home-study materials or spring for the tuition.

As chancellor of Nouveau Riche, Piccolo doesn't teach any classes, but he is a regular on stage on the university's awards night, working the crowd of star-struck students eager to pose for a quick photo with him. At 50, he has the tanned good looks and boyish charm of actor Dennis Quaid, whom he resembles.

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." 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. Piccolo says he and his wife also own investment properties in Arizona, Nevada, Oregon, and Utah; Mary Piccolo manages the portfolio. Piccolo estimates its total value at $20 million.

Investor Concierge, Nouveau Riche's brokerage arm, typically sells students about 100 properties a month, most ranging in price from $100,000 to $200,000, says the firm's president, Craig Cottrell, 39. To date, Investor Concierge has racked up property sales on 1,100 units, most of them in Georgia, Michigan, and Texas. Over two recent weekends the firm moved 60 condo units in a complex in Fenton, Mich., a blue-collar town 15 miles south of Flint, at prices ranging from $60,000 to $67,500.

The way Investor Concierge structured the deal in its prospectus, the buyers put 10% down, borrowing the rest using an interest-only loan. Trouble is, the rents on the condos won't cover the total cost of owning them. No problem. Investor Concierge explains that it has arranged for the seller of the condo complex to subsidize the rent for as long as two years at above-market rates. The seller will also pay all the management fees and real estate taxes for two years. As a result the investors should be $145-a-month cash-flow positive. But what happens when the subsidies expire, and the buyer discovers he is losing money every month? Will he be able to unload his property or command a higher rent?

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. The housing market here is tied to the auto industry, and prices are falling faster than you can imagine: 10% last year and another 10% this year. Who knows when it will reach rock bottom? As far as rental properties, it's hard to rent anything here now. Houses and apartments sit empty all over town. People are leaving because there are no jobs here. We're really suffering."

Despite these risky deals, Nouveau Riche's enrollment keeps booming and Piccolo's pockets keep filling, which lets him plan big for the future. The company bought 24 acres on top of a black-lava mountain north of Phoenix. In 2008, Piccolo intends to break ground on a new campus with modern steel and glass classrooms and four luxury dorms, each with its own pool and barbecue pit. The pools will be linked by a man-made river; students will be able to float from dorm to dorm, riding the river on inner tubes. "It'll be very theme-y," he says. "We're going to build a Disneyworld for investors and entrepreneurs." *  

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Controversy

Nouveau Riche University is the subject of some controversy. Inside Tucson Business states that the students of Nouveau Riche University bear all the risk of investing, while the university collects non-refundable fees and commissions. Inside Tucson Business also claims that Nouveau Riche University is required by state law to be licensed by the Arizona State Board of Postsecondary Education, which it is not.^[3]

Fortune Small Business reports that the company's affiliated investment broker, Investor Concierge, markets properties as "positive cash flow", but the cash flow is often positive only because of temporary subsidies, putting the buyer at risk of negative cash flow after the subsidies expire.^[2]

Founder Jim Piccolo filed for bankruptcy in 1990.^[2] In 1991, he pled guilty to felony auto theft, which was reduced to a misdemeanor after three years probation.^[2] Piccolo says he and his wife own investment properties in Arizona, Nevada, Oregon, and Utah and that Mary Piccolo manages the portfolio. Piccolo estimates its total value at $20 million. Despite his enthusiasm for real estate, Jim Piccolo states he has not bought any property lately

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Associated Companies

A number of sister companies are associated with Nouveau Riche University including Save Our Score credit score specialists to help high-risk borrowers improve their credit-score for a fee^[2], Inc. It, Inc. incorporation service, Number Won Accountants accounting firm, and the NRC Mortgage company.

Students may purchase access through Nouveau Riche University to Investor Concierge™, which is a web marketplace for investment properties that the website states can provide positive equity (i.e., sale price less than the appraisal value), and positive cash flow. The "positive cash flow" typically excludes property maintenance, vacancy factors, and various fees; and assumes an interest-only loan.^[2] Investor Concierge claims sales of about 100 properties a month.^[2]

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http://realestate.meetup.com/424/calendar/5564330/

 

Do not miss this event folks!

March 16th and 17th
9am to 5pm

Skokie Holiday Inn
5300 W. Touhy Ave
Skokie, IL 60077

We have Jim Piccolo, the visionary founder of Nouveau Riche University, Chris Wilson the wholesaling and landlording instructor, and Andrew Yurasek all training at this event!

During this event, Students will learn:
? How to develop a millionaire investor's mindset
? The language of real estate investing
? How to avoid the 12 deadly success killers of
real estate investing
? How to build and manage teams
? How to find properties
? How to fund property acquisition
? How to fix up and rehab properties
? How to manage properties and your real
estate business
? How to tenant properties ? How to sell properties quickly for higher
profitability
? Simple strategies to help foster courage
in new investors
? Taking the appropriate actions that lead
to the desired results
? Building a plan for continuing education
and greater sophistication
? Why educated investors are more
profitable investors

And so much more?

Please call Bob Tierney to get registered for this event...

 

 

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