Real Estate Investing: The Three Levels of Success

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 cash flow 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”.

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. They’re 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!