History of the Housing Market

Source:  Yahoo Video / ABC News

What Nouveau Riche University Is

Nouveau Riche IS an MLM company. Their most loyal and passionate “alumni” will argue otherwise until you’re blue in the face. Just remember, if it walks like a duck, quacks like a duck, and looks like a duck, it’s a duck. So what if it is? The concept of MLM is actually a good business model. It’s just that MLM has gotten a bad rap. For example, unethical people misleading others that “it’s not MLM.” For those living in denial, let me offer some advice. First, if you are so convinced that you’re onto something real, be proud of it. Most of the MLM stigma is because you’re afraid to admit it and “trick” prospects into coming to a recruiting meeting. Second, tell the truth. You created the stigma MLM as earned, you get rid of it.

How to spot an MLM? Look for the signs, catch-terms, and typical MLM phrases. Here are some Nouveau Riche terminology and its translation into MLM:

Independent Student Advisor (ISA) = Up-line, Sponsor, Mentor. This is the person who brought you in and gets a portion of your money you paid to get in. In this case your up-line gets about half of the $16,000 you pay to get in.

$16,000 Regent Tuition/Education/Courses = Product. If you don’t provide something in return for money, the government considers it an illegal pyramid. As long as you receive something “of comparable value” for the amount of money you paid, you’re not a pyramid. I suppose if it’s spun right, it’s not totally beyond the realm of possibility that you get $16,000 worth of education. Just understand that you can buy the same information at Border’s Books for under $500.

Learning Seminar = National Conference. Every MLM has them. They are very motivational, uplifting, attitude strengthening meetings. They are needed to keep you “in the game.” They are the high school equivalent to a pep rally. Nouveau Riche even throws in a few investment seminars. They have a few motivational speakers and self-help workshops that most can benefit from. You also get a heavy dose of the “success stories”, an endless parade across the stage of “ordinary people like yourself who’ve made it.” If you’re looking for a self’-help seminar, you might get your money’s worth. If it’s real estate education you’re going for, stay home, pick up a copy of Rich Dad, Poor Dad and put the rest of the money you would have spent into a high interest CD. By the end of the year, you could have enough for a down payment on your first property.

Learning Event = Recruiting Meeting. Your first introduction will most likely be through an invitation to one of these by someone you know who probably just joined and wants to share this exciting new opportunity with you. The meeting starts with some exciting ways to make lots of money fast in real estate. They may show “hypothetical” examples of the riches that lay ahead for those who see the “opportunity” and are willing to make the “investment” into their own education. The “education” you pay for will give you ALL the tools you’ll need to be a successful real estate investor. Next up will be the testimonials of people who have “had their lives changed” from NRU. With the excitement level peaked, they tell you how you can start your education to riches. You can start for as little as a few hundred dollars, but the person who brought you will tell you why you want to get the Regent tuition package which is slightly higher, about $16,000.

Other Commonly Used MLM Words & Phrases: Opportunity, life changing, mentor, coaching, coachable, conference call, retirement, financial freedom, synergy, network, passion.

What Nouveau Riche University Is Not

NRU is not a scam. At least not totally. You will get an education in real estate investing. It’s just REALLY expensive and you CAN get the $16,000 Regent tuition equivalent education for much less than $1000. I give the same education for free. I say it’s not really a scam because they do tell you up front what you get, and usually most ethical ISA’s present things straight, although there is a lot of exaggeration that goes on. But then again, tell me when there isn’t some form of exaggeration when sales are involved. The problem is, most people that cry scam don’t do any research before jumping in head first. They got wrapped up in the hype and take it all at face value. There’s always some vision of “financial freedom and getting rich fast” the person has formed when deciding to “enroll.” Some time after shelling out $16k, they realize it’s not what they expected, a get rich scheme via easy street, and cry “foul.” For them, their education was a $16,000 lesson in life. Although $16k is a lot for a dose of reality, I know of “life lessons” that have cost people hundreds of thousands of dollars.

I will acknowledge that there are people who have made money in NRU. Some have made a lot of money. The success stories fall into two categories. The first category are the ones that should be commended. But these same people would have made it with or without NRU. These people have the discipline, mindset, attitude, work ethic and most important, the constant pursuit of learning and improving; qualities all successful people possess. These people applied what they learned at NRU and with HARD work, became successful. Who cares that they paid more than they had to for their education? They’re not complaining, so what do you care? The second category of people who’ve made it leave a path of destruction behind them. While it’s true they made money in NRU, their journey involved recruiting. Lots of it. After their first two Regent recruits, every Regent recruit after that puts about $8000 in their pocket. If you get someone decent at sales, put them in a room full of hype, frenzy and a road map to riches, well, it’s like shooting fish in a barrel. Each “fish” equals $8k. You do the math. It doesn’t take long before you’d have a nice war chest to start your investing. Sadly, most of those fish will soon be crying scam on some blog. They’re the path of destruction I referred to.

NRU is not a university. At least not in the context that many people enroll under. They do have fancy marketing stuff that looks official, but when you really look at it, it’s a very HIGH priced education that is nothing revolutionary or contains any top secret formulas. But if you think that paying $16k makes it valuable and empowers you, who am I to stop you? Just be smart and do your homework before forking out $16k.

NRU isn’t as easy as it’s made out to be. In fact, it just doesn’t work in most cities. The theories taught are real. But theory and real world can be very far apart. It’s possible that if you applied some of the strategies taught enough times (100 or more), you might eventually get a hit. But the reality is most people give up frustrated way before that. Also, it could literally take 100 or more tries to get that one deal. Along the way, be prepared for LOTS of rejection; some pretty personal and cruel. One of the education courses should be on developing thick skin and handling rejection. That would be the most valuable course. If you think the rejection thing is minor and you’re not worried about it, be prepared for an eye opening experience. You have no idea what you’re getting into.

NRU’s examples of their “favorite deals” on Concierge are not accurate. Question the numbers. That’s all I’m going to say about that.

Now that you have a little more insight, here’s your homework. Read the comments on this post and see if you can tell the level of and length of time that person has been in NRU.

Here’s the scale:

1) Just joined – 1 year: Passionate defense of NRU; calling all naysayers ignorant, uninformed or close-minded. Anything negative about NRU takes a little toll on their faith and creates a little bit of doubt.

2) 1 year – 2 years: Defense not so passionate but still believe in NRU saying their experience was worth it.

3) 2 years – longer: Support of blogs calling NRU a scam.

Elliot Lau

Housing Stocks Become Hot Item
Investors who bought housing stocks at the beginning of the year after two and a half years of steep declines are being rewarded for their prescience.

As the Federal Reserve started cutting interest rates, the stocks of home builders Toll Brothers, Lennar, and Hovnanian rose 40 percent, 52 percent, and 96 percent respectively.

Some analysts believe these increases portend sunnier days ahead for the entire housing industry.

“What took us into this malaise will be what takes us out,” Bill Miller, portfolio manager for the Legg Mason Value Trust, wrote this week in a letter to the fund’s shareholders. “Housing stocks peaked in the summer of 2005 and were the first group to start down. Now housing stocks are one of the few areas in the market that are up for the year.”

“Stocks are predictive of the industry about six to nine months ahead of time,” adds Justin Walters of Bespoke Investment Group in Harrison, N.Y. He says he is bullish on the sector, noting that house-price futures at the Chicago Mercantile Exchange have been forecasting a bottom in house prices in many U.S. markets toward the end of 2008.

Source: Fortune, Colin Barr (02/14/08)

Reprinted from REALTOR® Magazine Online 2/15/08 with permission of the NATIONAL ASSOCIATION OF REALTORS®. Copyright 2008. All rights reserved.

Elliot Lau

If this is your third visit looking for the next lesson, congratulations! It shows that you are eager to learn; an essential ingredient of all successful real estate investors. If you are new here, go back and read the previous lessons. We’ll wait. You don’t want to miss any lesson since each builds on the last. This lesson will focus on conditions and types of different real estate markets. You need to understand each because different conditions will dictate different strategies. A market condition can last for months or years. They can also change very quickly. In hot markets, delaying a decision by as little as an hour can be the difference between making or losing thousands of dollars. How do you keep tabs on the current “temparature” of the market? The best way is by carefully choosing your Realtor. If you’ve done your homework and have chosen a Realtor that’s an expert in both his/her market and real estate investing, you will get the most up to date information and conditions. No one has a better pulse on the market than an experienced Realtor.

Types of Real Estate Markets

While there are many variations, real estate markets basically fall into three categories; Buyer’s Markets, Seller’s Markets and Neutral Markets.

This lesson will cover Buyer’s Markets; what is considered a Buyer’s market, the advantages and strategies for buyers.

Buyer’s Markets -A Buyer’s market exists when the inventory of homes for sale exceeds the number of buyers looking to buy homes. Experts agree that “months of remaining inventory” is the best indicator to determine what type of market exists. A Buyer’s market is one in which there are 6 or more months of remaining inventory. The higher the number, the stronger the Buyer’s market. The formula to compute Months of Remaining Inventory is: Total number of active listings divided by the total number of closed or sold transactions for last month. That number will be your Months of Remaining Inventory or MRI.

When the number of homes for sale is up, buyers make the rules. Buyers have more choices, less or no competition; and Sellers know that. In a cold real estate market, serious sellers are more willing to negotiate. Buyers can offer less money and ask for more, including closing costs, contingencies, even inventory. When I bought my last home, it was a Buyer’s market. As I was touring the home I eventually bought, I noticed a beautiful brand new big screen TV in the living room. Joking, I said “how about throwing in the TV?”. Not expecting anything but a chuckle from the owner, he responded without even a pause by saying “Put it in the offer.” Long story short, I now have a $4000 TV in my living room.

If you are a buyer, the best time to buy is in this market. Ironically, during Buyer’s markets, I often hear “I’m going to wait for prices come down even more.” As you learned in lesson 1, no one can precisely time a market. I’ve seen countless people try, only to miss out on another great opportunity. These people sit on the fence looking for the market’s bottom and find it after it’s too late. It’s easy to spot these people. They’re the ones saying “I remember when…, If only I had bought then.” You also learned in lesson 1 that it’s okay to buy “high”. Remember that “high” is relative. If you bought a home considered high at the time for $250,000 and 5 years later it was worth $500,000, does it matter that you bought that home for a “high” price? Not only does it not matter that you bought high, it would have been a mistake not to have bought that home. Everyone wants a deal, but you will never know when the market has hit bottom until it’s on the way back up.

What to Look For

Signs of a Buyer’s Market include: inventory increases each month, there are more than 6 months of remaining inventory, comparable sale prices (sales of recent comparable homes) are higher than active listing prices, the number of closed sales in current month is lower than previous months, median sale prices are declining, properties remain on market longer (DOM).

Buyer Benefits & Strategies in Buyer’s Markets
Lower Sales Price - in a Buyer’s market you will generally see both lower list and sale prices. Buyers many times can get properties at prices below market value. Be careful though. A Buyer’s market doesn’t mean that buyers can offer less for all properties. Buyers must consider other factors including days on market, desireability, scarcity and the list price. If a property was just listed yesterday at a price already below market value and is in excellent condition, that property will more than likely sell at list price.

Concessions and Repairs -in Buyer’s markets, buyers can ask for a lot more. Regardless of the market, all terms of the sale are negotiable; buyers are just more likely to get sellers to agree to give more. Common consessions include having Seller pay Buyer’s closing costs and inspection costs. Buyers can also ask for repairs or credits. Once again, other factors need to be considered. It’s not uncommon to have multiple offers in Buyer’s markets. In that case, a serious buyer would forego asking for much.

Renegotiate the purchase price after the inspection -depending on what is found during the inspection, major repair items can be the basis for negotiating either credits or lowering the purchase price.

Other Strategies - Ask for contingencies. Shorten the period a seller has to respond to your offer. Ask for extras (remember my $4000 TV?). Ask for things you don’t want. If a Seller doesn’t want to give it up, use that to negotiate. “Well, since you won’t give in on that item, let’s lower the purchase price.” Sometimes that works. If it doesn’t, who cares, you didn’t want it in the first place.

Get in the game!

These are just some of the strategies buyers can use in a Buyer’s market. An experienced Realtor that’s an expert at negotiating will know how and when to use different strategies. The bottom line is, if you’re a serious Buyer, get in the game. This is your time. Don’t be the one years later saying “If only…”

Up next – Seller’s Markets

Until then, happy house hunting!

Elliot Lau

“Like any real estate advice, this seems very positive. I agree with everything that was said, however, I think you have missed an important component. Location!
Depending on location you could purchase a piece of property that may never increase in value during your lifetime. Look at areas where severe economic hardship has set in (Detroit & Chester). I would like to see data that supports these timing statements. Graphs are always nice too.”

The response argued that location should have been mentioned as another important component. While I’d agree that location plays a factor in real estate, time is much more important. There are lots of components to consider when analyzing a real estate investment. If I included every one of those components here, it would be, at least confusing, at worst discouraging. Location has been widely accepted as the most important factor to consider. With that being said, let me dispell another myth:

Myth: There are only 3 things that affect the value of real estate: Location, Location, Location.

The response continued on to say “Depending on location you could purchase a piece of property that may never increase in value during your lifetime.” citing Detroit, MI as an example. While widely believed, that remark is incorrect. The fact is time, not location, would be the determining factor. Of more than 275 major metropolitan cities in the U.S., every one of them, including Detroit, has gained in value since 1980. Sorry, I’m still learning how to insert graphs here. Instead, go to OFHEO,the federal office that keeps these stats. Did you realize that since 1980, Michigan real estate prices have increased by almost 215%. Detroit over the last 5 years has increased 4.4%. Modest but at least an increase in value. Last year, the real estate values in Detroit decreased by 3.3%. These stats support the principle of time being the determining factor.

Time vs. Location

I was born and raised in Hawaii. I formed a belief from an early age that the Leeward coast on Oahu was a depressed and impoverished area that investors should stay away from. That belief is shared by most locals. In the mid 1990′s, I met a young investor who came to Hawaii with less than $100,000 in his pocket to buy real estate. He didn’t have any preconceived notions about the Leeward coast. Instead, he did his homework. He instilled real estate investment principles and, despite location, invested heavily into that area. Ten years later, he has amassed a real estate portfolio worth over $15 million. Time, not location, determined that. The area’s severe economic hardships have shown little or no improvement since the mid 90′s. Despite those economic conditions there, anyone who invested in that area 10 years ago has expereinced some of the best appreciation on the entire island. Imagine if he had not invested in the area for reasons of location and economic hardship. Real estate will always appreciate in value over time.

Real Estate Deals in Detroit

And just to show you that Detroit isn’t as bad as you think, check out this link: Detroit Deals. Professional real estate investors don’t follow the crowds or buy into prejudices. They use sound investment fundamentals to make their decisions.

I thank Turtle for his response and encourage more to do the same.

Happy house hunting!

Elliot Lau

There are 33 American billionaires that made their fortune from real estate. All of them collectively agree that nobody can precisely time any real estate market, not even them. So if these 33 people (whose combined net worth made from real estate totals over $80 billion dollars) admit that they can’t time the market, how can you? But before you give up on your dreams of becoming a real estate tycoon, there are valuable principles and practices used by each of these 33 real estate billionaires and most professional investors. Their secrets, mostly unknown to amateur investors, can be learned. They will all be revealed in this first and following educaltional series. This series will teach you the secrets, and mistakes, of the real estate billionaires to help increase your chances of not having to rely on social security for your retirement.

The Secret of Timing Real Estate Markets

Adopt the same techniques of those that have built fortunes in real estate. For starters, they follow this creed: First, Buy low and sell high and second, There’s never a bad time to buy, there’s only bad times to sell. If you incorporate this creed, you’ll begin to understand what all successful real estate investors have learned. It’s okay to buy high, as long as you sell higher. In fact, looking back at any time in history, the price of real estate at that given point in time was “high” at that time. I remember when my parents bought their first home in 1960. It was $50,000. It was, at that time, an obscene amount of money to spend on a house. That home today is worth over $1.5 million dollars. My point is that at the time my parents bought that home, the price of real estate was high. Did it matter that they paid a “high” price for that home? In hind sight, the answer is easy. In fact, it would have been a mistake to not have bought that home. Of course hind sight is always 20/20, but one fact remains. Real estate will ALWAYS appreciate in value over time. Yes, there will be peaks and valleys, but over time, it will always appreciate in value.

All successful real estate investors know that real estate is a long term investment. Sure, you can make money quickly in real estate. But the quick path is also filled with high risk, sleepless nights and will need a little luck. These types of investors are called flippers. They know that the higher the risk, the higher the reward. Investors looking to make the quick dollar better have deep pockets and an iron clad stomach. Flipping real estate is not for the faint of heart. One wrong decision can cost you everything.

So what’s the secret?

So what is “The Secret” to timing real estate markets? The secret is you don’t have to time markets to build wealth in real estate. All you really need is time. If you can adopt the discipline of patience and combine it with time, you have moved a huge step closer to financial independence. It is that simple. Mind you, I didn’t say easy. There’s a distinct difference between simple and easy. The next in this series will get into the nitty gritty and teach you to how to become a professional real estate investor.

Until then, happy home hunting!

Elliot Lau