Purchasing Investment Real Estate 101

CHAPTER ONE:

Who are you really and should you be investing?

 

I began investing in real estate after watching my father for many years.  I could not get the feeling out of me after looking at his face and watching how much joy a piece of real estate brought to him.  It was a great accomplishment and pride to see him work on his newest project and see the pride of ownership when it was complete.

 

I bring this point up because we must all know ourselves and be able to handle the ups and downs of owing a piece of real estate.  During the numerous seminars, books, and other teachings, I encountered a gentleman in Arizona that I will share with you.  In John Burleys'[1] book, "Seven levels of Investor" he discusses where you might fall in his hierarchy. 

 

Level Zero - The Non-Existent

"This type of investor is the Non-Existent.  This person lives their Financial Life with their head in the sand like an ostrich.  They essentially have NO investments or savings."

Level One - The Borrower

"As implied above, the Borrower is often in a far worse financial position than the Non-Existent, though their potential for change may be greater.  The Borrower often has very high debt."

Level Two - The Saver

"The third type of Investor is the Saver.  This person usually puts aside a "small" amount of money on a regular basis."

Level Three - The Passive Investor

"The fourth type of investor is the Passive Investor.  These investors are aware of the need to invest and usually participate in their Company/Government retirement plan (IRA, 401k, Pension, Social Security, Superannuation, CFP, etc.)."

Level Four - The Automatic Investor

"When you reach the level of Automatic Investor, your investment success is assured.  You are truly on the path to Automatic Financial Freedom."

Level Five - The Active Investor

"The top two levels of investor are reached  by only a very small percentage of people on planet Earth.  Contrary to what most people (who do not have money) believe, you do not have to become a Level Five or Level Six Investor to become wealthy.  But you do at least have to master the habits or Money Steps of a Level Four Automatic investor."

Level Six - The Capitalist Investor

"The seventh and final level of Investor is the Capitalist (remember we start at level Zero-The Non-Existent).  Few people in the world ever reach this level of investment excellence."

 

 

I consider myself to be at Level Five right now.  I purchase and sell about 3-5 homes a year and help others do the same.  I mange properties for clients who may be at the lower levels while I train them in the techniques of rehabbing, repairing, and renting a home. 

As I write this in April of 2011 the market is very soft, the rental market has taken a dip, for the first time in 30 years, and is just now beginning a recovery.  My rents have decreased from a high of $1600 a month to $1400, but have hit bottom.  I am predicting an upturn in the next few years that will bring those rents back up to the 2006-year highs.

 

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[1] John Burley – Seven Levels of Investor.