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Real Estate Investing: The Three Levels of Success

Aug 25, 2007
If you have been investing in real estate for any length of time, then you have undoubtedly faced frustration, hit some highs and then crashed into some lows! Ultimately, your goal as a real estate investor is most likely to generate immediate cash flow and long term wealth and increased net worth. True financial success is achieved by combining these two elements - cash flow and wealth creation, or net worth. Cash flow is considered as the monetary profit that is earned every month to support your lifestyle. This can also be used to invest in assets that may later appreciate in value.

Three levels of real estate investors are as follows:

Level one Investors - In this level, the investors learn the basic tricks of the real estate investment business, and they use it to make real estate investment a profitable venture. They learn this by making their initial deals profitable. Thus, Level One investors ensure that real estate is the path to economic success. They are aware that there is much to learn from this vast field, and they try to understand it. Real estate investors at this stage should spend time learning the business, evaluating the details of the deals, and make sound decisions. Often times, this will involve some level of training or coaching to ensure success. There are two main reasons why investors fail at this level: (1) Fear and (2) Lack of Knowledge. Because of this, education is critical at this level.

Level Two Investors - At this level, investors master the five core real estate business skills and also maintain a real estate portfolio. Second level Investors are those investors who generate a monthly cashflow ranging anywhere from $5000 to $60,000 per month (depending on location, market conditions, etc.), and also add an average of $250,000 to their net worth per year. Some investors have a wrong notion that after reaching the second level they have achieved it all. They do not realize that there is so much to achieve down the investment line, and that the benefits are worth their exertion. The biggest pitfall that investors at this level tend to fall into is that they get "comfortable". As soon as you are comfortable, you stop stretching and learning. Level II investors that excel are those that are constantly adding new weapons to their arsenal. These investors practice negotiating tactics, refine their marketing strategies and learn advanced strategies like note buying, triple net lease investing, etc.

Level Three Investors - Level III real estate investors build a small fortune in such a way that they earn the majority of their income through passive methods. At this level, investors are generally not working in the day to day grind of the business. Their not out meeting with sellers night after night, sitting at open houses on Sundays, etc. They have effectively learned to make their money work for them and are using their assets to acquire other assets. For example, instead of rehabbing houses at this stage, level III investors may lend hard money to Level I and Level II investors! Often times, level three real estate investors will branch out into other businesses and create additional streams of income. Often times, their income may be similar to a level II investor, they just simply don't put in the same time, money and effort. They have mastered advanced techniques are also utilizing leverage.

In order to become a Level III investor (which is what most real estate investors envision when they get started in the business), there are a few basic steps that will help you move through the stages.

But first off... you must realistically evaluate where you are in your business right now. Once you have determined that, you can follow these steps to advance your business.

Level I to Level II: Level One real estate investing is about learning the basics of real estate investing. There are three hurdles you may need to cross to get to Level II.

1. Take action: Stop "thinking" about real estate and start "doing" real estate. Pick up the phone and call sellers. Drive different neighborhoods and learn the communities. Attend networking events and trainings with other investors.

2. Find a mentor: It is critical that you find a real estate mentor, tutor, advisor, etc. that can help you succeed in the early stages. This person will not only teach you the mechanics, but will also help answer your questions and move you past the fear.

3. Invest in your education: You'll find that the most successful real estate investors never stop investing in their real estate business and their education. Initially, it may be a tough nut to swallow, but long term, it's essential to your business. There is but one small caveat. You need to invest in CURRENT education. You see, what worked just a few years ago, is not working the same way today. You need the most up to date information as it comes down the pike!

Level II to Level III - Once you've gotten the basics down and you've done a few deals, you're ready to advance to level II. At this stage, you will begin to master the core skills that are critical to long term success in your real estate investing business. These include:

* Find motivated sellers consistently, keeping your pipeline full with deals
* Master the art of negotiation
* Evaluate deals quickly and take fast action
* Diversify. It's time to start adding lease options, rentals, wholesale flips and retail flips to your profit pipeline.

Level III - It's time to take all of your knowledge, experience, and proven systems, and leverage yourself. It's at this stage that you're ready to venture out into additional streams of income and let your business work for you! This is the level at which most people begin to teach other investors, to create systems, and to make money with their information!
About the Author
Get your FREE industry trends physical newsletter (plus $853.00 in free bonuses) at www.realestaterant.net. Heather Seitz works with investors, trainers and promoters, and is the cofounder of the Real Estate Training Academy and Real Estate Rant, the industry's premier resource for real estate investors. Take your business - wherever you're at - to the next level in the next 90 days. www.realestaterant.net
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