The world of real estate can either be a blessing or a curse. Which one it becomes is entirely up to your perception. If you are one that constantly lets your emotions control you, real estate might not be for you. However, if you can maintain your balance in the midst of anything, you stand to do very well.
One day you may be on top of the world with multiple properties about to close. You may be thinking to yourself how easy this real estate game is. You can’t believe that you didn’t get started sooner… then comes the next day. Those buyers that you had lined up the day before are now having second thoughts. They want to back out. Now you have to come up with another month’s worth of mortgage payment. Now, in reality, you’re still going to be fine in the long run. At the time, you might see it differently, though. The point is that real estate investment is an emotional roller coaster, so be prepared. Once you make it to the other side of the spectrum, it is well worth the hassle. You must always look at the big picture. Don’t ever allow yourself to be bogged down by the details. In other words, focus on what you’re going to…not what you’re going through.
In real estate investment, there are basically three separate tiers of investors. Nearly all investors fit into one of these three categories. Most people start at the first tier and try to work their way up. There are no guarantees that you will ever make it to the next level. You might be a Tier 1 investor for life and that is ok. You’ll still do better than if you never entered real estate. Let’s look at the different tiers a little more closely.
Tier 1 Investors- These are basically the “newbies” in real estate investing. They may have pulled off a few profitable deals and they now have a taste for real estate. They have officially had their eyes opened and “seen the light.” They know that real estate can work for them and they plan on becoming financially independent. They probably aren’t completely confident in their abilities, but they are willing to learn. In this category, you don’t want to challenge Donald Trump to an investment contest just yet… even if you feel invincible.
Tier 2 Investors- This is the next level in real estate investment skill. These investors have figured out what it takes to make a decent living in real estate. They have anywhere between $5000 and $50,000 per month coming in from their investments. They know almost all there is to know at the core of real estate investment. Many people would be completely happy at this level of investment income, but there is another step up from this. These people have increased their net worth to $250,000 per year. Life is starting to look pretty good for this level of investors. They have a substantial portfolio of properties and it is only growing from here.
Tier 3 Investors- These are the “big dogs” of real estate investment. This is undoubtedly the category that someone like Donald Trump falls in. These investors have mastered pretty much every aspect of real estate investment. They built their business from the ground up and they now have MASSIVE amounts of money rolling in. They easily make as much money as those in Tier 2, but it comes in passively. They have reached a point where they may only work 10 hours per month. This is where every real estate investor wants to get at some point. If you get to this Tier, you’ve definitely done your homework.
Now only one question remains…how do you get from Tier 0 to Tier 3?
Of course, I didn’t mention Tier 0 earlier, but it obviously refers to those who would like to invest in real estate. To enter into Tier 1 is a big step for most people. This requires you to leave the “hoping and wishing mode” to the realm of actually doing. It’s no longer good enough to say how you’re going to have a huge real estate empire some day. You have to start with the first property. Immediate action is required. Go talk to some realtors and start learning from the best. Any successful mentor you can learn from is a plus. This is the tier where it all gets underway.
From this tier, it’s on to Tier 2. In order to reach the second tier, you must have mastered several key skills. It’s necessary that you are now a master negotiator. You also have to be very analytical to find the best deals out there. Wasting time on a bad deal is not something that you can afford. You also must be able to locate motivated sellers on a regular basis. Even with a product, if you don’t have any people to buy it, you go out of business. Last, you must know how to structure several different kinds of deals. You need to know about short sales, cash sales, wrap mortgages and lease options to name a few. While this may seem like a lot to know, you will be greatly rewarded for all of your hard work. This is where the money starts to pour in.
Once you’ve established yourself as a bit of an expert, you’re ready for Tier 3. The main thing to remember in this stage is to expand your thinking. You can’t just focus on houses anymore. Shopping malls and commercial buildings are now on the horizon. Get some of these properties and your investment will be returned 10 or 100 times. Once you’ve done this, you can start to delegate some tasks that you perform. This is where passive income starts to come.
Tier 3 is the ultimate in real estate investing. Many want to get there but only a few will. If you stay dedicated and patient, there’s no reason why you can’t be one of them.
The Three Tiers of Real Estate Investors
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