The Formula For Equity In A Combined Margin Account Is: The 5 Levels of Real Estate Investing

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The 5 Levels of Real Estate Investing

To fully comprehend this report you need to be familiar with my ACoPuLiPro formula.

A = Asset Attraction

Co = Asset Conversion = Negotiation and Deal Structuring

Pu = Asset Purchase = Finance

Li = Asset Liquidation = How you dispose of the asset

Pro = Asset Protection

Level 1 The Technician.

In this level you learn how the business works and how you can do most of the work yourself. The key word here is “Yourself”.

In this stage you spend a lot of money learning, going to seminars, buying books, and DVDs. You will especially buy books and DVD that tell you how to do the work. You may buy videos on: “How to do electricity, carpentry, tiles, plumbing, etc.” and videos on “How to hang sheetrock…” This is the How To aspect of the business. The Doing of the Thing as Michael Gerber calls it.

A: Marketing

You depend on the wholesaler to find deals you can buy.

You do not do a lot of marketing because you don’t have the time and the knowledge to put a system in place.

If you are direct marketing you may write the envelope yourself.

You may receive calls yourself and call people back.

There is no screening process.

You don’t have a true marketing system.

You tend to take all phone calls.

Your cell phone rings all the time.

Co: Conversion

You understand the “3 Offers System”.

Offer 1: All cash

Offer 2: Some cash now, some later

Offer 3: Owner financing

You understand the MAO formula.

MAO = After Repair Value (ARV) X 65% minus Repair.

You know how to research the value of a property by calling real estate agents

You know how to estimate repairs within 10 to 20% error margin.

You have no reliable contractors. You don’t really know how to deal with contractors.

So you have 2 problems:

1- You tend to do the work yourself by spending too much time at Home Depot or Lowe’s. But you are learning. You may have a truck so you can carry your own equipment and material.

2- You pick up cheap contractors or you hire them and they do a lousy job. But you saved money and that was the goal.

Pu: Finance

You heavily depend on hard money lenders, credit cards, and partners.

You spend a lot of money on financial charges but you have no choice because you never structure your business to have a good cash level. Your credit is OK but not really great, your score is about 680 or under. You may even be around 700 credit score and you don’t have the knowledge to use the credit efficiently.

Li: Liquidation

You have a cookie cutter system.

All your business or 80% of your business is to buy, renovate, refinance, and rent to Section8 or you do a lease option.

Pro: Protection.

You have no protection whatsoever. You may have a corporation. Since you refinance in your own name you leave the property in your name, and you are exposed to all kinds of lawsuits and judgments because you don’t know what to do next.

Duration of this stage

Most full time investors stay in this stage for 1 or 2 years.

Most part time investors stay in this stage 2 or 3 years or forever.

This level is the beginners level. Most investors go through this stage. And there is absolutely nothing wrong with this level.

Your objective is to suck up all the information you need and move onto Level 2.

Level 2 Systems Creation

If Level 1 is hard working, then this level is a confusing stage.

Often you’re clear on what you don’t want, which is Level 1.

You’re pretty clear on what you want but you have a hard time describing it and putting it on paper. If you find what you really want you don’t know exactly how to get there. You do know you have to put a system in place. So here you go, you start to put some systems in place.

A: Marketing.

You understand that deals need to come to you. You don’t have to chase deals but attract them.

You understand how to write a postcard, letter.

You know how to present the letter so it would be opened by the recipient.

You understand direct marketing.

You understand the combination of marketing, media, and message.

You know how to find the data to mail the postcards.

You understand the system. You do some of the work and you outsource the rest.

There is just one little problem: You don’t seem to have enough money to outsource everything.

You have a marketing system but it is not on autopilot.

You may have purchased some websites from a guru but you don’t know how to make it work efficiently. You also are dependent because the guru hosts your site. If you failed to make the monthly fee you got disconnected and may lose the site altogether. You got nailed with the hosting fee. It’s too expensive and after a while you wonder why you have purchased the darn thing in the first place. You don’t have time to learn Internet Marketing and have your own web system to attract deals.

Co: Conversion

You can quickly negotiate deals

You understand the 3 systems offer (see level 1)

You have your own tools to pull comps

You pretty much know the repairs values at 5 to 10% error margin.

You understand how to get deeds. You haven’t done many of them.

You understand lease option, short sale.

And the real benefit in the conversion system is that you have all your paper ready to do any deals you can find.

You can find contractors who are pretty reliable but they are also working for other people, so some time you may have to go there and do some of the work yourself. Since you still have your own equipment and maybe your truck, it’s not a big deal to go there and get the job done.

Pu: Purchase/Finance

You now have good relationship with some hard money lenders but still depend too much on them and you’re still paying the 14% or 15% interest rate with 5 points down. Your credit is much better because you are making all your mortgage payments on time, but you debt to ratio start going high.

You understand the need of a business unsecured line of credit and working line of credit but you don’t really know how to structure them so you go and have some line of credit in you own personal name. You may even use your home equity line of credit to invest in deals.

Li: Liquidation

Since your marketing is working pretty well you start wholesaling some of the properties but now you have another problem in your hands: You have to keep different lists. You have to keep a wholesale list, a retail buyer list. And you also have to keep a list for your tenants and potential tenants.

So this put you in another intensive work, which is using software to keep lists or keep them manually. So basically you move from doing some technical work yourself (level 1) to doing some more computerized or some handwriting work while your contractor is doing the physical job work for you.

Pro: Protection

You understand protection at this level.

You understand corporation, land trust. However, you do not understand the power of a Family Limited Partner. In fact you don’t have one.

At this stage you are frustrated because you think you know a lot but you spend a lot of money still trying to figure out how to make CONSISTANT income.

You don’t seem to have an efficient team to work with you.

The system is not 100% autopilot.

You may be making 6 figures income net but you are wondering why you are not making a heavy 6 figures income or a 7 figures income.

Your business is not a million dollars business but is pretty close to it. We are talking gross income.

You cannot bring a consistent 5 figure home but some times you can bring a very good 5-figure income and sometimes you seem you cannot make any money. You feel the yo-yo effect.

You have the knowledge but you do not seem to get ahead.

Duration: Depend on individuals

One year to forever.

You basically stay in this stage until you get onto level 3.

For the record, I specialize in moving real estate entrepreneurs from level 2 to level 3. If you’re interested to join my Platinum Group, send me an email at jack@reonline101.com with the subject line “Platinum Group”.

Level 3 Multimillion autopilot real estate Corporation

In level 2 you have created systems but they were not in autopilot. In this level you enjoy seeing your business soar. You work less and make more. Ron Legrand said “the less I work the more I make”. Jacques Coquerel said, “Do less make more” because I agree with Ron. This is the concept in this level 3. This is a leverage stage. You leverage everything by outsourcing and relying on your dream team.

First of all let me explain the difference between outtasking and outsourcing.

Outtasking is to find one person to do one task and to do it well. When he is done with it he is gone from your business until you need a task to be done again and you hire someone else. For instance you need someone to fix the roof so you call a roofer. He comes and does the work. Six months later you need someone to do another roof and you call someone else. So you outtask one particular area of your business. Hire a contractor to do the tile, the sheetrock, the heating and air, etc…

Outsourcing is when you have a contractor who basically is in charge of finding people who will outtask for you. So, for instance, if you need a roofer your contractor that you outsource will find a roofer; he will find the tile guy, the sheetrock guy, the electrician.

So, your outsourced guy is basically working for your corporation. He may have his own corporation; but you may call him one time and he takes care of the rest. It’s one person finding multiple outtasking people; instead of you finding different people.

You devote your time to the following areas because you understand leverage.

Those areas are:

Marketing

Negotiation

Networking. Mastermind, Platinum Group.

Raising Funds.

In this level you spend more money in your education because you understand ROI, which means Return on Investment. You understand the value of good education. By spending more you associate yourself with better and competent vendors, partners, and mentors.

Let me give you a sign so you can know when you reach level 3.

When you don’t have any problem spending more money on better education, you’ve reached Level 3.

A: Marketing. Deals come to you from all directions.

-Your own marketing system is that you put in place, run by outsourced people.

-You have students bringing you deals.

-Your partners bring you deals for joint-venture.

You outsourced the technical aspects of the business.

You oversee the marketing but you do not do the marketing.

The key here is that you also concentrate on having a list of buyers instead of just finding deals. You spend part of your time building a responsive buyers list.

You bring automatization of your business; you bring all the right tools, the right software.

You do offline (postcards, letters sequences, telephone, fax delivery system, radio, and yellow pages) and online (website, auto responder system) work.

Measure: You can measure all your campaign offline or online and know exactly what producing good response and what is not producing response.

Your ROI is between 5 to 10 times your investments that is 500 to 1000% return. For instance when you spend $1,000 for a campaign you net about $10,000.00. Therefore you don’t mind spending $10,000.00 a month to make between $50,000.00 to $100,000.00. And you crush your competition because they cannot afford to pay that much.

Co: Conversion

You tend to do things very differently.

You don’t calculate MAO (Maximum Allowable Offer) like you used to. You see the deal and walk through the house and know if it’s a good deal or not. You have enough data in your mind that every house reminds you of another one; and you judge by instinct. You calculate quickly the profit in your mind even before you accept the offer.

You tend to be a little too selective.

You rather get the deed then a lease option. At this stage you easily find deals that will bring good income on a monthly basis.

Pu: Purchase

You have all source of money

– Unsecured Business LOC

– Working LOC

– Your have money in Roth IRA

– Partners are lying up to do deals with you

– Private money lenders are ready to do the deal with you if you find the right deal.

The money is not the problem.

Since the money is not the problem you become a little careless. You tend to do bigger deals, you want to exercise these financial muscles. Therefore this is the stage where you can also lose big money. Get some heat. Beware for this is the time where some investors suddenly have financial challenges and can even go back to Level 2.

Li: Liquidation

You have a huge list of buyers. You have plenty of choices to dispose of deals.

You tend to get rid of all the small deals that you had before and keep the one with bigger equity because you want to maintain your multi-million dollar net worth.

Pro: Protection

You understand all aspects of protection. You master and use:

Corporations and LLC

You understand the value of Wyoming Corporation and offshore corporation.

Trusts

Family Liability Partnership

You have some obscure corporations that are beneficiaries of your trusts.

Pro: Production

You have enough back end products so you create more money when you sell one property. For instance you have some revenue streams of income by doing seminars or by doing coaching programs.

-Advantage: you have enough money coming to you. You can invest and reap a huge ROI

-Dangers: your 6th sense is not developed well enough to prevent some serious financial mistakes mostly by misjudging some partners.

Duration for level 3: 3 years to forever. Many successful investors stay in level 3 because it’s hard to go to level 4.

Level 4. Multiple automatic streams of income

At this stage you’re a big player.

You became a teacher (I didn’t say a guru)

You look at real estate as another product. It’s just another house; it’s a mean to make money.

You are doing multi-million dollars deals.

You wonder why people are still buying small houses in questionable areas.

You had forgotten where you came from in term of where you have started.

You easily got frustrated with people not getting ahead.

You do not understand why people do not want to spend money with you to learn all you know.

You tend to forget to tell people all the pain and agony and sleepless nights that you faced in previous years. You tend to paint a beautiful picture of real estate because you are describing your own reality and forget that less than 3% will ever make it where you are.

You try to get people to your level but they are not ready. And sometimes you end up hurting some of them financially because they do not have the resource, yet they want to follow your advice. They are in level 1 and you want to move them to Level 4. You may not understand the different levels we are talking about because you never sat down and reflect on it.

You may become insensitive because you’ve made it by share of gut and forgot it was with a big help from God. If you are spiritual you keep on asking yourself deeper questions like: “Is this all it is to it?” or “Where should I go next?”

If you are a go-getter you tend to act like Napoleon Bonaparte telling yourself “One more battle”. You don’t know exactly where you should end because your exit strategy has never been clear to you. But this is when you spend more time in reflexion and you spend time wondering how you can give back to community. You keep on doing big deals that bring big money but since money is not the issue you tend to make money working for you instead of you working for the money.

This is a very good place to be if you understand when to exit, when to sell your business.

But there is another level. Level 5

It’s a big jump from level 4 to level 5.

Level 5. The last level

The 7 figures passive income level

This is where the Trumps, the billionaires are.

If you are making $20,000,000 (Twenty million gross income) in level 4, now your business is about one hundred million to couple billions dollars business.

There is a huge difference between level 4 and level 5. Most of us will never get there.

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