First Rental Property

If you do not know much about real estate investing, you are not alone.

There are many people out there that have grown up and lived their lives, not being taught how to properly invest their money.

If you have somewhat of an interest in investing, one thing that you will commonly hear is that it is a good idea to ‘diversify your investments’.

What exactly does this mean?

Diversification is the act of spreading one’s investment over a number of investment vehicles. These vehicles differ with respect to their risk level, whereas some vehicles are very risky and others are much more conservative.

The objective of diversifying is to mitigate your risk. As such, if one of your investment under performs, you will have other investments that will be performing better. As a result, the overall performance of your investments will not be significantly impacted in a negative manner, if a portion of the investment under performs. There will be other investments that you own that will be performing better, that will be able to pick up the slack.

The principle of diversification should always be used with real estate investment.

There are many hardcore real estate investors that only subscribe to one way of investing in real estate.

For instance some real estate investors live and die by the buy and hold strategy.

This strategy is where a real estate investor purchases a rental property, rents the property out to a tenant, holds it for a period of time, and then sells it for a profit.

Another common real estate investing strategy is Rent To Own. This is a strategy where a real estate investor acquires a home, and rents it out to tenant/buyers. The tenant/buyers rent the property from the investor with the option to purchase the property at a later, predetermined date, for a predetermined price.

The above 2 strategies are the ones I feel most comfortable speaking on, as I know about these strategies. There are many other strategies that are used by real estate investors. Investors also flip houses, rehab ugly looking houses, and wholesale houses as well.

I can confidently say that in Canada, wholesaling and rehabs are not as commonly done, as they are in the United States.

In Canada, the most popular real estate investment strategy that is used by individual investors is the buy and hold strategy.

Why Real Estate Diversification is important to you

Real Estate Diversification is important to you because through diversifying your real estate assets, you are able to learn which investment strategies you like the best, and which ones you least like.

If one investment strategy does not work for you, you will have other investment strategies to fall back on.

For example, flipping is an investment strategy that does not work well in all real estate markets. Sometimes investors participate in flips and end up breaking even on their funds invested, or even worse, they end up losing money. If at the same time this same investor held buy and hold properties in their portfolio, if they are strong cash flow properties, then these properties will continue to perform well, even though the flip just flopped!

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I have met a lot of real estate investors over the years. The most successful of these investors have what I like to call The X Factor.

I have never met a real estate investor who is extremely successful, who does not have The X Factor. There are many, many real estate investors out there, but only a select few have this X Factor.

What is The X Factor?

I have come to realize through observation that The X Factor is twofold. The X Factor is:

1) Passion

Many real estate investors might say that they are passionate about real estate investment. However, I challenge all of these investors on this. Passion comes with different intensity levels. It is possible to be slightly passionate about something, and much more passionate about another thing.

I have witnessed a lot of real estate investors who own multiple rental properties, but who have lost the passion for what they do. It is almost like they are just going through the motions. They no longer have a passion which fuels them to continue to move forward, and purchase additional rental properties.

Once this passion diminishes, it becomes hard to stay motivated. When motivation declines, it is difficult to continue to execute against one’s goals. Once the passion leaves, the real estate investor’s spirits begin to diminish. As such, if you observe a lot of real estate investors, you see those that continue to purchase rental properties, and then those that stop acquiring at a certain number. Sure, the argument can be made that not all investors want to buy an unlimited amount of properties. However, I counter this argument by saying that all real estate investors truly want to buy an unlimited amount of properties. The ones that forge ahead and continue to purchase are those investors who have stayed passionate about their cause.

How you can bring your passion back!

This is simple to do, but it takes effort. When you feel that you are lacking passion in an area (real estate investment), you simply have to speak to and become encouraged again by people that are passionate. These people do not even have to be passionate about the same things as you are. However, they have to be very passionate about whatever it is that they do. When you speak to them, and as they encourage you, you will begin to rekindle the passion that you once had. Think of yourself as a rechargeable battery and think of other passionate people as the battery charger. The more time that you spend with other passionate people, the more ‘charged’ you will become. After you have spent sufficient time with other passionate people, you will be fully charged, passionate again, and ready to work towards achieving your goals.

The X Factor is also:

2) Confidence

Most people lack some degree of confidence in some area of their life. Just like ‘normal’ people, many real estate investors lack confidence. It is this lack of confidence that prevents many real estate investors from forging ahead and acquiring multiple rental properties. It is also this lack of confidence that makes certain real estate investors fearful from trying other investment strategies. It is also this lack of confidence that prevents these investors from coming out of their comfort zone. By not coming out of their comfort zone, they are not able to grow and develop as real estate investors.

How to bring your confidence back!

This is slightly harder to do than bringing your passion back. However, this can be done as well. Again, you have to surround yourself and talk to more confident people than you. These people should have high confidence in a number of areas of their life. Spend time with them and understand what makes them confident people. The more confident people you are around, the better chance you will have to figure out what you need to do to make yourself more confident again. For example, if 10 extremely confident people tell you ways in which you can become more confident, chances are that they have explained the same process to you in 10 different ways. Hearing this information in 10 different formats, makes the information more digestible to you. As a result, you are better able to utilize this advice, hearing it 10 times than if you only heard the advice once, and through only one person’s perspective.

By maintaining both Passion and Confidence, you will be a fearless real estate investor, afraid of nothing, and prepared to work towards achieving your goals.

Develop The X Factor and make sure that you never lose it. The X Factor is truly what makes the difference between good real estate investors and great real estate investors.

A very good example of a real estate investor who has The X Factor is Mr. Don R. Campbell. Don is the President of the Real Estate Investment Network, REIN. He is a person with great integrity and a clear vision.

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Do you ever wonder how people end up making so much money through investing in real estate?

I used to.

At the beginning, I thought that the only way to make a profit in real estate was to buy a house, keep it for a really long time and then sell it for a higher price than what it was paid for.

There are many people who use this strategy and this strategy alone, but not Canada’s Most Versatile Investor, Mark Loeffler.

Mark is one of the leading authorities in Canada in the Rent To Own System of real estate investing. He was featured in the Canadian Real Estate Magazine not to long ago. It was this Magazine that dubbed him The Versatile Investor. This name has stuck since.

Mark and I met about a year and a half ago through the Real Estate Investment Network, also more commonly referred to as REIN.

REIN is a network of Canadian real estate investors investing in Canadian Real Estate. REIN has been said to be one of the best real estate investment networks in North America by real estate gurus such as Ron LeGrand.

Mark and I recently sat down for an interview. This article will be the first of many articles focused on successful real estate investors. Specifically I asked Mark questions about his first rental property purchase, and how his real estate investing career has evolved since then.

Here is my recent interview with the man himself, The Versatile Investor, Mr. Mark Loeffler:

Neil: “Mark, where did you buy your first rental property and what type of property was it?”

Mark: “My first rental property was a duplex. It was located in Newmarket, Ontario.”

Neil: “What year did you purchase it, how much for, and what do you think it is worth now?”

Mark: “I bought the duplex in 2003 for $205,000. Comparable properties are selling for nothing less than $270,000 now.” (Interview took place on January 5th 2010)

Neil: “What was your reason for buying your first rental property?”

Mark: “I bought the property for cash flow“.

Neil: “At the time of your purchase, did you know of anyone else investing in real estate?”

Mark: “No”

Neil: “Did you purchase this house yourself, or did you have any partners that you
purchased it with?”

Mark: “I purchased this house by myself.”

Neil: “What was your biggest fear about buying your first rental property?”

Mark: “I was afraid that I would not be able to find any tenants.”

Neil: “How did you come up with your down payment?”

Mark: “I used my savings. I put $5,000 down as my down payment.”

Neil: “How did you get your first mortgage?”

Mark: “I got my first mortgage through the Royal Bank of Canada (RBC)”

Neil: “Who managed the property for you?”

Mark: “I managed the property by myself.”

Neil: “What is the current state of the property?”

Mark: “I still own the property, and it is rented. A couple of years after I purchased the property, I brought in a partner who joint ventured on the property. As a result, I was able to take out some equity.”

Neil: “What did you do with this equity?”

Mark: “I reinvested the money into real estate. I did a couple of flips in Toronto. The money that I made from the flips eventually went into Rent to Own real estate investments.”

Neil: “Where are your Rent to Own homes located?”

Mark: “Across Canada. In Ontario and Alberta.”

Neil: “Why did you decided to invest with the Rent to Own strategy?”

Mark: “I decided to invest using the Rent to Own strategy because of the increased cash flow. There was also less maintenance with Rent to Own. Also, flipping was getting too tight.
Also, it was around this time that the Government changed their policy regarding the 100% financing rule when purchasing a home. This created an opportunity for me, this allowed me to change strategies and invest using RTO. Also, I found it tough to find good property management for small units. You don’t make your money managing, you make your money buying.”

Neil: “What current projects are you currently working on that you want to let people know
about?”

Mark: “I have a new book out called, Investing in Rent To Own Property: A Complete Guide to Canadian Real Estate Investing. I also have a Rent To Own Course called Rent To Own Made Easy. You can take the course from home and it has a 60 day e-mail mentoring component. The course takes you from A to Z and it shows you how I run my
business and how I find tenants. We take a tenant first strategy. We find people that
can’t qualify for a mortgage and we help them purchase a house. We do between
3 to 5 of these types of deals a week.”

So there you have it, a one on one interview with The Versatile Investor, Mark Loeffler. Mark and I have chatted about doing subsequent interviews for my blog, and he is agreeable. So stay tuned for some more great content from Mark Loeffler, The Versatile Investor. In fact, we may even get him on as a guest blogger!

The beginning of the calendar year is always a time of reflection for a lot of people. It is a time where, people set goals that they would like to achieve in the coming year. These goals may be goals that someone wants to achieve in a number of areas of their life. Goals can apply to such areas as relationships, health, finances, or your career.

As a real estate investor, you should also have very specific goals that you want to achieve in the upcoming year. Goal setting is very important because it gives you something to aim for.

Many experienced real estate investors often have multiple goals with regards to their real estate investing career. In addition, goal setting is especially important for people who are looking to buy their first rental property.

If you are new to the real estate investing game, and you have not purchased your first rental property yet. Here are some action steps that you need to take:

1. Write your business plan

This is the most important thing that you need to do. A business plan is essential to a real estate investor. I suggest that you start simple, and write out specifically what you are trying to accomplish with real estate investment.

2. Write your mission statement

Just like how major companies have mission statements, write out your own personal mission statement. This action will help clarify to you why exactly you are getting involved with real estate investment. Once you complete this task, you may be surprised as to what your inner motivations are.

3. How many properties do you plan on purchasing

It is imperative that you write down how many rental properties you are planning on purchasing. This is important to ‘commit to paper’ as this simple act will cause you to stay focused and committed to achieving what you have set out in writing.

It is important to note that the timeline in business plans can vary in length. For instance, a business plans can be written taking into account the next 5 years, or it can be written taking into account the next 10 years. To new real estate investors just starting out, I recommend that you begin by writing your business plan over 1 year at least. What this means is that you are writing down all of your goals with regards to real estate investing over the next 1 calendar year.

4. Where are you going to get your financing from?

As part of the business plan, it is important that you document where exactly you are going to get the financing to purchase the properties that you have committed to purchasing. This is important, because by planning exactly where you are going to acquire the financing, allows you to have a game plan moving forward. To take a simple example, let’s assume that you have decided that over the next one year you are going to buy one rental property. At this point in time, you do not know where you are going to obtain the money to purchase said rental property. As such, in your business plan, you need to write down specifically where you are going to obtain the money. As a result, you would have to write down that you are planning on purchasing one rental property over the next year, and that you would be partnering with a joint venture partner who would provide the funds required to purchase the rental property

As another example, let’s assume that you have a goal of purchasing 2 rental properties over the next calendar year. You know that you have enough personal savings to purchase one rental property, however, for the second property, you are not sure where you are going to get the financing. In this scenario, you would write down in your business plan the follow:

“I will purchase one rental property this year, and will utilize my own personal funds in order to make the down payment. I have X amount of funds saved, and all of these funds will be used towards the down payment.”

Further, you may also write down in your business plan the following:

“I will purchase a second rental property this year, by partnering with a joint venture partner. The joint venture partner will provide the funds required for the down payment, and I will do all of the work required in purchasing the property, negotiating the sale price, overseeing any repairs and maintenance, finding tenants, maintaining the ongoing relationship with the tenants, and I will also oversee the eventual sale of the property at the end of the holding term. The joint venture partner and I will split the cash flow on the property 50/50 and I will distribute the returns to my joint venture partner on our agreed upon intervals. Upon the eventual sale of the property, the joint venture partner will receive all of her initial funds and then the profits will be distributed 50/50 to the joint venture partner, and myself.

The more detail that you have in your business plan the better. A business plan is like having a road map. You begin at point A, and you need to plan your route so that you can eventually get to point B. Point A is a position where you don’t own any rental properties and point B is a position in which you finally own a rental property or properties.

In Part One and Part Two of The Evolution of the Real Estate Investor we looked at the first four stages that a real estate investor goes through as they ‘evolve’ as investors.

Stage One through Stage Four are generally forward moving stages, in which the real estate investor continues to progress, and moves closer to the their eventual goal of purchasing a rental property.

Before we move onto Stage Five, there is still a little bit more to cover on Stage Four, so that is where we will begin:

Stage Four – Continued

You begin to research real estate

It is noteworthy to mention that financial analysis also occurs during this stage. The level of financial analysis between real estate investors will vary quite substantially here, based on the fact that the investor in not sophisticated with real estate investment at this point. The financial analysis consists of crunching number, in order to determine how the real estate investor will end up purchasing their rental property. If the real estate investor has knowledge as to what amount of down payment is required, they will start to figure out from what sources they will draw these funds from. The sources that they consider, could be personal savings, a line of credit, borrowed funds from a family or friend, or perhaps the funds would be coming from a joint venture partner.

In this stage, the real estate investor will also calculate what numeric value their down payment will be. For example, if they are looking at purchasing a rental property for $100,000, their required down payment may be 20% of the value of the home. If this is the case, the real estate investor will know that they will have to come up with $20,000 as their down payment. The figure $20,000 is obtained by multiplying $100,000 by 20%.

In this stage the real estate investor begins to form relationships with either mortgage brokers or their local banks. This is being done because, the investor knows that they will have to call upon these individuals in order to get financing set up for their rental property in the not too distant future.

Stage Five

Fear Strikes

Fear is ugly. I hate fear because fear kills dreams.

Fear is a thorn in the side of a real estate investor. In this stage all of the confidence and forward momentum that the real estate investor built up during the first four stages is eliminated.

This is a point where the real estate investor begins to doubt their plans. They begin to doubt that real estate is a wise investment to make. Fear causes the real estate investor to see all of the negative sides of real estate investment. It now becomes very difficult for the investor to see any of the benefits that they were once very excited about. It is at this stage where a lot of the negative feedback from people significantly affects the investor. For example, the investor may have some friends that think that investing in real estate is a bad idea. They may think that it is a bad idea because their uncles’, neighbour’s, sister’s, friend, once invested in real estate and had a bad experience. This negativity affects the morale of the real estate investor. They quickly find themselves in a downward spiral, with depleted confidence, and uncontrollable fear.

Stage Six

Digging Deep

In my opinion, this is the most mysterious stage. This is the stage where the real estate investor is able to overcome all the negativity produced by Fear. They are fully able to overcome their fear and move onto the next stage.

However, let’s make one thing clear. There are many individuals who are never able to defeat their fears in stage five. As a result, their fear continues to consume them and they never end up investing in real estate. All successful real estate investors were able at some point overcome their fears by digging deep.

You might be asking, what does digging deep mean? Below is an explanation as to what I believe it means.

A real estate investor goes from being paralyzed by fear and inaction to overcoming their fears and regaining their confidence. I have observed that three are a number of different variables that can contribute to the regained confidence on the part of the real estate investor.

One of the ways in which a real estate investor is able to set aside these fears and move forward towards their goals is by:

1) Staying positive

A positive outlook kills fear. It takes a concerted effort to remain positive. However, those that are positive, and make a strong effort to remain positive are always able to overcome their fears and move forward.

Another way that a real estate investor is able to overcome their fears is by:

2) Surrounding themselves with like minded people

Like-minded people provide encouragement to one another, they also all push one another toward achieving their goals.

A third way in which real estate investors over come their fears is by:

3) Having a supportive family

This does not apply in all cases. However, I have seen very successful family partnerships of real estate investors. Also, in some cases, because family values are the same among family members, it is easy to collectively move forward in investing in real estate as a family. Throughout the journey, these family members can lean on one another for support during the tough times, or in order to stay motivated. All of my personal success is a direct result of my supportive family.

A fourth way in which real estate investors over come their fear is by:

4) Having the X-Factor

There are some cases where real estate investors are easily able to overcome their fears. In addition, there are other cases, where fear never enters the mind of the investor. I call this the x-factor, some people have it, and most people don’t. The x-factor really means that a real estate investor is indifferent to fear. Fear does not affect them. Or at least, they do not let fear affect them in the same way as it might affect other people.

In summary, it is in this stage where the real estate investor is able to dig deep and overcome all of their fears.

Stage Seven

You Buy Real Estate

All your efforts pay off in this stage as you purchase your first rental property. A real estate investor experiences a big adrenaline rush in this stage. Also, there is a great sense of accomplishment felt during this stage. Often times, months, or even years of research and anticipation have led up to this stage and this purchase. Although a fantastic accomplishment that should not be overlooked, this however is only the beginning of a real estate investor’s life. This stage often feels like the end of the journey. However, as all veterans’ real estate investors will tell you, this is only the beginning!

The journey that a real estate investor goes through as they evolve is filled with both excitement and disappointment. Through the experience that you gain, you become a different person. I believe that your perspective changes on the topics of money, business, and risk, to name just a few. My perspective on life has definitely changed when I look back upon my experience as a real estate investor.

The question can be asked: What is the biggest change that takes place with an individual? It is tough to say, as I believe this change differs with each and every individual. I have seen people change for the better and for the worse as they have ‘evolved’. I have seen some people’s egos inflate, and at the same time I have witnessed people become more humble and grounded as they continued to obtain more experience as a real estate investor.

In this article I am going to outline some of the significant stages that I believe a real estate investor goes through. I have gone thorough all of these stages myself.

The First Stage

Real Estate Does Not Exist

I believe that all real estate investors start off at this point. No matter what an individual’s life experiences are, there is a point in time in a real estate investor’s life in which they are not interested in real estate and frankly; they do not know that real estate exists. When I say that, ‘they do not know what real estate exists’, I mean that they are oblivious to it. Of course they know that houses, apartment buildings, and shopping malls are physical structures, however, they are indifferent to these structures, and they do not see these structures as assets, nor is there any appeal whatsoever.

If a person grows up in a family of real estate investors, then obviously they are exposed to real estate investment at an early age. Often people who grow up in a real estate investment family become investors themselves. However, when they are young, there is a time in which they do not know what real estate is.

The minority of the population are real estate investors. As such, most people grow up not knowing anything about real estate, or the benefits of owning real estate investments. These people grow up and are socialized in a certain way. Perhaps they are conditioned to believe that going to college or university is the appropriate and responsible thing to do. As a result, they grow up, go to school, graduate from college or university, and end up getting a job in their field of interest. There is absolutely nothing wrong with this, as this is the normal course of life for a lot of people.

Alternatively, perhaps an individual is taught from a young age that going to school and then studying a trade is the right way to go. So they do exactly that. A very good living can be made by working in the trades, so there is nothing wrong at all with this course of action either.

Real Estate Investors can have any educational background at all. In fact, real estate investors can have absolutely no academic educational background and still be very successful as an investor. There is however a common characteristic that I have noticed with these stage one investors. This common characteristic is motivation. These people who are in the first stage want to achieve more in life than what they are currently achieving. They have motivation, and they want to move forward in life.

The Second Stage

Something happens with real estate

As a real estate investor evolves, in the second stage, something happens with real estate. There can be a variety of occurrences that happen to the investor here. I will share with you what happened with real estate in my life.

I was in stage one probably for the first 23 years of my life. During these years, I did not know that real estate existed. I did not even consider the benefits of owning real estate as an investment. I went to school, did very well through high school, and off to University I went. I graduated from University with a Psychology degree started working for one of Canada’s largest banks. It wasn’t until something happened with real estate that got my attention. Here is what happened:

About 7 years ago a long time family friend that lived close by to us put a down payment on a townhouse located in our town. They had plans of downsizing by selling their much larger house. The townhouse that they bought was brand new and it was yet to be constructed. Over the next year, as the townhouse was being constructed, they continued to live in their existing house. This all was happening as the real estate market was booming. As a result, the value of the townhouse that they had put a down payment on was continuing to climb month after month. The townhouse was located in a new area of town, where there were a lot of young families moving and a lot of new homes being constructed. After the year was up, they sold their existing larger home, and moved into the townhouse. They spent 2 years in the townhouse and then sold it and moved to St. Lucia where they bought another house.

Sitting on the sidelines, I watched this all happen before me, and I saw that they made $120,000 in 3 years. They bought the townhouse initially for $200,000 and ended up selling it for $320,000 after 3 years. Not taking into account any realtor, legal, or admin fees, their gross profit was $120,000 in 3 years. Not bad at all! Like I said, I sat on the sidelines and watched this happen. Clearly, something interesting was happening, and I was taking note of it.

The Evolution of a Real Estate Investor – Part Two
The Evolution of a Real Estate Investor – Part Three

One of the greatest benefits of a low interest rate environment is that the cost of borrowing money is cheaper compared to a high interest rate environment. A low interest rate environment can be an encouraging time for real estate investors. It is often during these times when first time real estate investors take the plunge and purchase their first rental property.

People feel more confident to get into the real estate investing game because payments generally can be lower in a lower interest rate environment. If an individual has a variable rate on a mortgage, this rate is linked to the Central Bank’s prime lending rate. As such, when the prime lending rate is low, or is decreasing, so too is the rate on the variable rate mortgage.

Despite the great benefits, low interest rate environments can also be very dangerous to novice investors. Since people feel confident to buy rental properties in low interest rate environments, they sometimes forget to take into consideration a number of important variables.

For instance, when interest rates start to rise, the investor has to make sure that they are able to financially survive the rise in rates, thus continuing to meet their payment obligations.

There are a number of ways that a real estate investor can exercise due diligence in order to avoid disaster in a rising interest rate environment. Here are some of the ways:

1) Buy for Strong Cash Flow

Whenever a real estate investor purchases an investment property, they must make sure that they have a positive cash flow being generated from the property each month. Therefore, as interest rates rise, and if the investor is in a variable rate mortgage, they should be able to withstand the increased cost of their mortgage payments. In short, the investor should still be generating monthly cash flow from the property, even after interest rates go up. If the investor finds himself or herself in a position in which they are not generating monthly cash flow after interest rates go up, then they are not in a good position. This concept of testing the future cash flow of a rental property, once interest rates rise is referred to as…

2) Stress Testing Your Portfolio

Stress Testing your portfolio is the act of calculating current payments on your rental property today, and determining today’s cash flow. In addition to determining today’s cash flow, the investor would also calculate the cash flow on their property, by using inflated numbers for their interest rate. The inflated numbers used, should represent the figure in which the real estate investor believes interest rates will rise to. By doing this exercise, the investor will be able to easily determine how much they are cash flowing their rental property today, and how much they would be cash flowing the property in an increased interest rate environment. Other than buying for cash flow, this is one of the most important activities a real estate investor can take when running their numbers in order to determine if the rental property is a good buy.

Here is an example of how to stress test your portfolio. Let’s say for instance that you are planning on buying a rental property valued at $100,000. The mortgage that you will have on this property is $75,000. The interest rate for this mortgage is 5%, you are going to make monthly payments of $436.21, and the mortgage is amortized over 25 years. The property taxes on this property equal $100/month and the property insurance is $25/month. The monthly rent that you collect is $1,000/month. If we add up all of our monthly operating expenses for the property ($436.21 + $100 + $25) this equals a total monthly operating expense of $561.21. Therefore, if we take our monthly rent of $1,000 and subtract our monthly operating expenses of $561.21, we get a figure of…$438.79 monthly positive cash flow. This is a good thing, as we are in a strong positive cash flow position.

If we believe through credible sources that interest rates are scheduled to go up over the next few years by 3%, we need to run new numbers. We need to now calculate what our monthly operating expenses would be on the property if the interest rate rose to 8% (5% + 3%). Therefore, the value of our property is still $100,000. The mortgage amount is still $75,000. The interest rate is now 8%, which means that our monthly mortgage payment on the property is $572.42. Our revised figure now for our total monthly operating expenses is ($572.42 + $100 + $25) which equals…$697.42. Therefore if we now take our monthly rental amount of $1,000 and subtract $697.42, this gives us a new figure of… $302.58. Therefore, we now know that if interest rates rise from 5% to 8%, we will still be cash flowing this property monthly. Therefore, we know that this is a good purchase, and if interest rates do in fact rise, we will not find ourselves in a compromising financial position.

3) Have a realistic idea of the future trends of interest rates

Most people live in a state of paranoia. They buy into all the negativity that the media feeds them. One day they might hear on the news that interest rates are anticipated to be on the rise. With this news they become scared of the potential financial consequences that may result. Further, they become so scared, that they take no action and end up doing nothing at all. This happens all the time, and I often witness this on a daily basis. The good news is that there is a solution to this. The solution is to only listen to credible sources. Don’t just listen to the news and advice from uneducated people or questionable sources. As a result, in this particular case, the best people that would have a pulse on the future trends of interest rates would be Economists, top Mortgage Brokers, and Central Banks. These are credible sources. Pay close attention to what these individuals and institutions are saying. Compare and contrast the information from these sources. If you do this, you will be much more educated than the average person regarding the future trends of interest rates.

When you enter into the world of real estate investing, you must constantly be focused on bettering yourself. The advantages of bettering yourself are numerous. One of these benefits is increased knowledge. You should always have a focus on increasing your knowledge, no matter what your focus is in life. Increased knowledge will definitely lead you to becoming a better real estate investor.

One of the best ways that I have seen as to how a real estate investor can better himself or herself is through what is called a Mastermind group. The idea of the Mastermind group has been around for many years. One of the best, if not the very best definition of a Mastermind group is contained in the book, Think and Grow Rich by Napoleon Hill. If you have not read this book, I highly recommend that you read this book. The principals talked about in this book, if practiced as to how they were intended will literally help you to grow rich. Most if not all of the modern day books written on wealth and how to acquire wealth echo the principals outlined in Think and Grow Rich. Once you read Napoleon Hill’s book, you will be able to notice all of the modern day references to the book Think and Grow Rich. There are numerous references and they show up everywhere in modern day literature!

The first step to becoming a better real estate investor is to establish this Mastermind group. When putting together this group, you do not want the group to be too big or too small. A size of about 6 people is the amount that I would recommend. You want all of these people to be real estate investors. If you do not have any rental properties as of yet, you will want people with experience who have purchased at least one property. This is crucially important. It is important because these people have experience. You will want to be able to ask advice from these other people. For instance, if you are looking to buy your first rental property and cannot decide on a particular geographical area, you can ask your fellow Mastermind members for their opinion. When these people are asked for their advice, they often times will have no problem sharing with you the pros and/or cons of the geographical area that they are invested. In fact, for the most part, people with experience with real estate investing generally have no problem with sharing their experiences or information with you. On the flip side, if your Mastermind group is full of people who do not have any experience in investing, this can be very problematic. It is problematic, as all of the advice that you would receive from these people will be based on theory and observation alone, not on practical experience. Theory and observation means nothing. Practical experience means everything!

One of the best places that you can find people to be on your Mastermind group is from local real estate investment clubs. This is a great place to find your group members as often times like minded people as well as action takers are associated with these groups. I caution you here however. Your Mastermind group will fail terribly if you simply just select people to become members who have no real estate investing experience. This needs to be a powerful group that you assemble. Each member has to have his or her own individual strengths. Each member must be able to bring value to the group. It is the value that each person brings that will make this group effective.

You also have to determine what your individual value is that you bring to the group. Do some introspection and figure out the things that you are naturally good at. Once you have identified these natural abilities, you will be able to confidently share these strengths with your fellow Mastermind members, as perhaps there is a member in your group that is not as strong in one particular area, that you are strong in. By sharing your knowledge with this individual, you are able to help them to grow and improve. As an example, I have been a member of a number of Mastermind groups. Some have been great, while others, not so much. The current Mastermind group that I am a member of is excellent. It is excellent because we are all action takers, and very motivated individuals. We each have our own individual strengths. One of the strengths that I bring to the group is my familiarity, comfort level, and experience with blogging. This is a topic that some of the Mastermind members do not have a lot of experience with. As such, I share with them my knowledge, in order to help them learn. Conversely, I learn a lot myself from one of the Mastermind Members who has a lot of experiencing doing Joint Venture Partnerships. He has a lot of experience and is very comfortable with this investment strategy. As such, he is able to field any questions that I throw at him. It is through my association with him, that I am better able to improve my knowledge on Joint Venture Partnerships.

You will also become a better real estate investor if you meet with your Mastermind group on a regular basis. Frequency of meetings is very important. This is important because effective Mastermind groups serve as an excellent way to keep people accountable towards their own goals. If you can meet with your Mastermind group once per month, this is a good thing. The frequency of monthly meetings allows you to go out in the real world and implement some of your goals and action items that were established by yourself or your fellow Mastermind members.

If you are not able to find people from local real estate investment groups in your town or city, another option is to check out online forums. There are lots of online real estate forums where people talk about real estate and real estate investing. If you search carefully, you will come across certain forums of people that are taking action, and that actually are real estate investors. By choosing this method, you could be able to form your Mastermind group virtually. The geographical locations where people live would not matter here, as you can connect via the Internet. Again, here you have to be careful, as you only want to associate yourself with action takers and real estate investors. Again, this is an important point because these are going to be the people that you learn from. You are not going to learn from someone with less experience than you in real estate investing. It simply just doesn’t work that way.