This is the incredible story and advice of Levi Brown, a small time investor who fell into all the standard investment traps before he found the lowest risk, highest return investment model out there: Student Rental Income Properties. In 12 years, from 1996 to 2008, Levi took his life savings of $40,000 and turned it into a net worth of $6 million and a real estate portfolio worth $12 million. That is an incredible 54% return per year! Then he not only weathered the recession of 2008 but thrived as rents went up dramatically in this unique real estate niche. Once he saw the amazing upside potential, low risk and sky high returns of his student rental investments, he developed and refined a system for buying and managing these properties that made him a multi-millionaire. Now Levi wants to share this rare knowledge with you because he believes there is plenty of prosperity to go around. Read this first section for free. In "Why Buy Student Rentals" you can scroll through the mini-chapters and follow the logic of Levi's smart decisions toward financial freedom. In "How To Buy Student Rentals" you will learn how to take advantage of the rare opportunity to make $100,000 in a day. Levi will also break down every real estate deal he did so that you can approach your first purchase like a seasoned professional investor. In "How To Manage Student Rentals" Levi will share with you his management system developed from years of trial and error. The ideas and tips are broken down month by month, giving you a template that can make you a competent landlord in no time. If you like his story and want to know more, he has put together 2 e-books that complete his keys to success. Read on and find out more about how you can accomplish this proven system and live the best life you can imagine!

Levi grew up in Texas and never had a problem knowing what he wanted to be one day. At the age of 7 he decided to be a veterinarian and at the age of 23 he graduated with his Doctorate of Veterinary Medicine from Texas A&M University.

In 1996, after 10 years of professional practice, he had only $40,000 in life savings and a small crisis about his life goals and the reality of a hard job. That was when he got on the rocket ride of real estate wealth. He took all his money and put it down on a student rental triplex near the University of Colorado in Boulder. For the next three years he lived in one unit while fixing it up and then moved onto the next one. By 1998, the value of his house had doubled and he bought 2 more student rentals. In 1999 they all went up in value another 25%, so he re-financed and bought 2 more. By 2000 he had 2 full time jobs, veterinarian and landlord. He had to carefully consider which one to give up. The decision was easy, the real estate was making 20 times more per year than his veterinary practice. Each year after that, from 2001-2010, he bought another student rental and fixed it up. Each property gave him a chance to design and implement a more efficient and cost effective system for renovation. Through years of trial and error and hard thought, he also developed a management model that reduced problems and achieved optimal results like 100% occupancy. He had finally found an outlet for his desire to be the best in the world at something.

Today, Levi has over 90 student tenants and is content with the size of his real estate portfolio. He is now ready to share his incredible knowledge with others in hope that they can find the financial freedom he has.

Well, who do you take your financial advice from? I have hired financial planners only to figure out that they give the same canned advice to each client and make a percentage of every mutual fund, term life insurance or other product they can sell you. I have listened to the advisors at my bank, who also were commission based, give biased financial advice according to the investment firms that train them. Soon I asked myself, "If they have such good financial advice, why are they sitting at that desk working for a living?"

Do you take your financial advice from family? From friends? Sometimes that's the best financial advice available to you, but just as often, that trusted advice can turn out to be very bad. Think about the hot stock tip you get from someone at work. Actually, I think about that a lot. I lost $30,000 during the tech stock boom because a friend of mine had some inside information from a venture capital company and promised me that this new teleconferencing company would be the next Microsoft.

The problem for most of us is that we look around and take financial advice from the best sources we have. But all too often those sources are either commission biased or just not informed enough to really trust with all your money. I think about Robert Kiyosaki's example in Rich Dad, Poor Dad. His poor father's advice about working hard was very well meant but it was not the key to independent wealth.

I believe it's best to take advice from self made people and by that I mean people who figured out their own way to financial success and retired early. The problem is most people don't know anyone first hand who made it rich. Well, I did it. I accidentally stumbled upon an almost foolproof investment system that allowed me to retire from my veterinary practice at 38… and the amazing thing was I started at only 34!

I believe rich people can give better advice because it's unbiased. They don't care if you listen to them, they don't need your commission. I'm the same way. I would love to share what I have with you because there is plenty of prosperity to go around. But you don't have to listen to me, there are other people out there who have made it and wrote about their success. I don't care who you listen to as long you know how to judge your financial advice and know if it's in your best interest and not the advice of someone trying to make money off of you.

I want to show you how I made a 54% return on my investment every year for 12 years in a row, going from a total net worth of $40,000 in 1996 to having $6,000,000 in equity on $12,000,000 in total real estate holdings in 2008. And then I will show you how I not only protected my gains from the recession of 2008 to 2011, but actually thrived as the rental market shot up in the aftermath of the housing crisis. It has been a phenomenal ride and the expertise I have picked up is worth sharing with whoever will listen.

Well, ok, let's start at the beginning. Let's suppose you finally have some money saved up and now you are faced with the difficult question of what to do with it. The way you use that money will greatly determine the course of your life. It's a decision making process where only a few succeed at maximizing the power of their savings. I want to show you my learning curve that includes the mistakes I made, so that you won't have to lose $100,000 in the stock market like I did. I also want to show you how I factor in the two most important principles into every money decision I now make: the lowest risk and the highest return.

Before I go further, I want to mention that I have shared my secret to wealth with a lot of people and the idea just didn't grab them. For a while, I probably sounded like an infomercial, mainly because I couldn't believe how rich I was getting and how fast it was happening. Of the hundreds of people I talked to about this system, only 3 took the plunge and invested like I did. I am happy to say they are doing very well with it but what amazed me is all the other people. Consistently, their eyes glazed over when I went into the nuts and bolts of my investment model and I could tell they were not ready for the information. It was like showing someone amazing pictures of Shangri-la, then a map on how to get there and they were done looking after three photos. I asked myself, "Why aren't they more excited to learn a low risk, high return, almost foolproof investment model?" I gradually understood that real estate, perhaps more than any other type of financial decision, arouses people's fears. There is the fear of taking on debt, the fear of dealing with tenants, but most of all, people have a subliminal fear of success. We tend to choose what we know and most people financially struggle their whole life. They dream about striking it rich one day but making choices toward an easy lifestyle is not something that comes naturally to them. A resistance to this unknown prosperity crops up. We all have a self destructive side and that voice comes out loudest when great opportunity shows itself. That fear voice tells us we better not to go into the unknown, it's better to stay where we are, struggling with the hardscrabble life that we have always known.

Now I'm not telling you to go blindly into real estate investing, a little fear is healthy. But I am telling you watch your reactions to these ideas and recognize your self limiting beliefs when they arise. There is a difference between caution and holding yourself back from success. Study yourself as much as you study your investment opportunities and with this knowledge, you can overcome your fears and make great investment decisions.

It hardly matters what you earn per hour or per year. The truth is that it is very difficult to become rich simply by saving your earned income alone. That is because it is very hard to work enough hours in the first part of your life to coast comfortably for the last 30 years or so. It's also hard to stay ahead of inflation and taxes. There is an old saying for success and you should follow it, "Don't work for your money, let your money work for you."

So you need to figure out a way to get your money working for you day and night. There are three main ways to make money in your sleep. The first way is to make an active investment in a business that can operate without you being there such as a restaurant or lawn care service or some type of retail sales, etc. There are thousands of small business ideas out there. But you have to be careful setting up an active investment because if you have to put a lot of work into it during the day to get it to make money while you sleep at night, then too much of that income will be earned income instead of passive income.

With a new business, there are some obvious difficulties. First off, you will have a great risk of going out of business and losing all your money. I remember reading somewhere that only 20% of small business start ups are still around after 3 years. Also, it may require a large start up cost and maybe a long period of time before it turns a profit. You will probably have to deal with employees, which is a big consideration. Another old business saying is that your level of stress is proportional to your number of employees. There are a lot of regular expenses with a business too, such as utilities, merchandise, advertising, the list goes on... I remember doing some temp work at a veterinary clinic in Longmont, Colorado about 15 years ago. One day I walked into the office of the practice owner. He had been a vet for at least 20 years and owned this clinic for more than 10 years. He was paying bills and he had an incredible pile stacked high. As he thumbed through them, he told me that all the income from the clinic for the first 27 days of the month went toward paying the bills and that he got to keep the money from the last 3 days. Folks, that's too much overhead. On that day I made a note to myself that if I was going to get rich, I could not do it by opening a veterinary clinic.
So, the first choice I made was to find a passive investment such as stocks or real estate. I wanted to invest in something that I didn't have to work on every day. It also made sense because I didn't have a large sum to start with. I wish I could tell you that I invested in student rentals right away but I wasn't that smart. No, I had quite a learning curve ahead of me before I got there.

My first investment choice was the stock market. It was an inevitable choice given that every public source of financial information pointed me there. I read Money Magazine, which I later found was nothing more than a stock industry mouthpiece. I watched CNBC where they blend entertainment with money choices to put out compelling shows like Mad Money. Every newspaper business section was dominated with stock stories and advice columns that promoted stock investing. Stock market news was all around me, it was the late 1980's and the tech boom was gearing up. I started out conservatively, putting all my money into mutual funds. My stock broker, who drove a brand new Corvette, patiently walked me through the process. Toward the end of the sales pitch he explained to me that I had to pay a 4% front load fee for all the funds I was buying into but that it was no big deal. Well, years later I understood that 4% was a big deal and it dawned on me that his new Corvette and my mutual fund fees were directly linked.

Let's look at what happens when you buy a mutual fund.

First, you pay the stock broker and his company a commission with 4-5% front or back end load fees. Then you pay the market makers. Those are the guys on Wall Street who spread a slightly different buy and sell price for the stock or mutual fund, pocketing the 1 or 2% difference. Then you pay the mutual fund managers in the way of monthly 12b1 fees. Then you have to pay all the CEOs, CFO's and other executives. You pay the salary and bonuses for every company in your mutual fund. It's not obvious because their salary is hidden in the price of the stock. But the more they get paid, the lower the profits of the business, which means a lower price for your stock. Here's another moment of awakening: I remember going to Florida and ended up at a fabulous mansion on the waterfront near Tampa. Turns out the guy who owned it was a market maker on the NYSE. To top it off, this was a multi-million dollar vacation home that he visited only a couple of times a year. As I stared at the opulence I could not help but think of all the small investors who had unwittingly contributed to his wealth.

Do you see what I am getting at here? There are a lot of middle men in the stock market and the thing about stock investing is everyone else gets paid before you do. What's worse is that none of those other guys have any risk of losing money. You are the only one taking the risk and it's a bad set up for you. You are the last one to get paid from investing your own money.

Here is one last injustice…. If your stars line up and all the market conditions are right and you actually end up making some money after you helped pay for your market makers mansion and your brokers Corvette, the government will hit you with a capital gains tax. You will have to turn over 30% or more of your profits to the government. This is an important consideration because it is much harder to protect stock market income from taxes than it is to shelter active business income or passive real estate income.

So, the first reason I like real estate is because there are no middle men taking their fee. You don't even have to use a real estate agent if you don't want to. I usually don't. There is nothing between me and the return on my investment.

BUT WHAT ABOUT FINDING THE PERFECT STOCK?

After getting burned in the early 90's for $30,000 on that risky venture capital tech stock, I became the most cautious stock investor you ever saw. Actually, I had already started investing in real estate with my first couple of student rentals but then I saw the perfect stock opportunity. It was a stock called Party Poker, an online gambling company that was a combination of three wonderfully addictive things: gambling, video gaming and the internet. The overhead expenses and labor costs were incredibly low because the software did all the work and the potential for millions of customers was very high because of the poker craze on TV. The way they made money was to set up online poker games that anybody could join and then they would take $1-$3 out of every hand that they dealt. I looked at this company from every angle and saw no way I could lose money. They had over 100,000 players and were clearing 2 million dollars a day. I took out a home equity loan and put down $90,000 into this stock. In the beginning things looked good, after a few months the stock had climbed to $115,000. Then one day, a senator from Oklahoma added a few lines into a midnight budget bill that outlawed online gambling in the U.S. Turns out the casinos in Las Vegas and Atlantic City wanted to protect their business and lobbied him with a lot of money. Suddenly it was illegal for Americans to play gamble online. Overnight my investment lost 80% of its value. I sold what was left of my perfect stock for $20,000 and that was my last go into the stock market.

The point is that with stock market investing, things that have nothing to do with your company or its business model can ruin your return. As I write this, the U.S. stock market is down dramatically because a small European country can't meet its' debt obligations. Last year, the stock market crashed because of a banking crisis. These things are out of my control and it bothers me a great deal that I can make sound decisions in the stocks I pick and still get clobbered. I want an investment that is immune to all the weird things occurring on the other side of the world.

THE STOCK MARKET DREAM IS NOT REALITY

I have my work cut out for me, convincing you that stock market investing is generally a bad idea. This industry is such a cornerstone of our economy that it will be hard for me to overcome all the money spent on advertising and the biased financial advice that you are exposed to. But I will try. Let me point out 3 more aspects of the big picture here:

Yes, it's true that the stock market has had a pretty good average yearly return the last 60 years or so. But that 9% annual return wasn't simply because investing in the stock market is a good idea. No, it was the rise of the American middle class that pulled the markets along with it. In the greater scheme of things this rise has stalled and now other market forces such as skyrocketing national debt and unbalanced budgets will make it much more difficult to find consistent returns in the U.S. stock market. Also, with the computer age and the instant transfer of information, the stock market has become much more efficient. Efficient free markets are supposed to be good right? Well, it is only good for those who get the information first and remember: you are the little guy. That means these big stock institutions will be able to access information faster than you and buy or sell accordingly before you have a chance. In a downward correction, they are the first to get out and leave all the small investors holding the bag. In an upturn they are the first to get in, leaving the small investors to miss the run. When the rich get richer, they do it at the expense of the little guy. The stock market is a place where the large corporations write the rules, not the small investors. So the odds are going to be stacked against you. It's just like a casino; they make the rules on how to play the games so that they have the statistical edge. And just like a casino, the big guys on Wall Street get bigger by gleaning the accounts of all the hopeful little guys that come along.

Ok, maybe I haven't convinced you yet, so let's look at a best case scenario. I mentioned before about finding the perfect stock, but what if you found the perfect company to invest in: a solid company that consistently produced 10% or even 15% growth a year? Well, it won't last for long. Here is why: Greed is going to eventually break this cycle. Excessive compensation is already a problem but as much attention as it gets, it's never going to go away. The members of those company boards vote to pay themselves and if their company grows 10% in a year they are going to take a nice fat bonus. If the company grows steadily for 3 years, they will increase their bonuses disproportionately by 5 fold. If the company grows 6 years in a row, they will proclaim themselves godlike and pay accordingly. The point is that executives will pay themselves more and more until the company loses money. Greed will not allow them to leave their pay alone and let a company make modest returns for years on end. That means that the companies individually and the stock markets collectively will go through boom / bust cycles. Companies have a great run then suddenly lose money. They start cutting costs by slashing jobs, then changing the CEO and the cycle starts over again. I have lived long enough to see that the stock market has major downturns every 5- 7 years and I know another one is coming. I just don't have the information to time when it will hit the markets again.

The crazy thing is that it is in the best interest of the big market players to have these downturns. It creates buying opportunities for them. But as a small investor, it felt like every market correction turned me upside down and shook the money from my pockets.

Nowadays, that is way more risk and volatility than I am willing to accept. With the right real estate investment, you can avoid getting beat up in the stock market shake-down game. Here's my conclusion about passive income:

I looked around and saw that starting a business wasn't the right thing for me: too much work. Then I tried my best in the stock market and got burned while watching a lot of people make money off of me. As far I could see, that left me with only real estate to invest in and thank goodness I got that right.

The first thing that appealed to me about investing in real estate is that I had complete control over it. I could make all the decisions affecting expenses and there were no middle men between me and my rental income.

Also, real estate allows a unique opportunity to harness the power other people's money. This is called leverage. I will go into detail about that later but when the bank loans on an income property, they are allowing you to use their money to buy a rental income stream. Here is the beauty of it… you may put only 20% down to buy a property but you get to keep 100% of the appreciation as the property goes up in value. So, as long as you have rents that will cover the mortgage and expenses, you are in pretty great shape.

Last, I like having a hard asset. I want something that I can drive by and look at. I remember the uneasy feeling I had when I first invested in silver. I got these fancy certificates when what I really wanted was bars. Sure enough, those silver certificates were worth a lot less when I sold them a few months later.

Out of all the places to invest my money, I believe student rental real estate is not only the safest and most secure but also can provide the greatest return. It took me some time to figure this out. I had to methodically go through many choices and find the best of every situation. Let me explain….

Just like debt, not all real estate is the same. I only wanted the safest, best valued real estate out there, something that will never go vacant and rarely, if ever, go down in price. By making several logical choices, I think I found the perfect formula. Let's walk through the process now and deduce the best type of investment property.

YOUR 1st HOUSE- SOMETHING TO LIVE IN OR RENT OUT?

Many people may wonder why this is the first question. But then again, most people's first real estate buy is a house that they live in. Well, from a financial point of view it's probably not a great choice. That's because when you buy a house to live in, you are not making a passive investment. You are actually taking on a large amount of debt that you have to go off and work somewhere to pay each month. If you are lucky and the house increases in value over time, then you have made an active investment that paid some dividends back. When you buy a house that you live in you are adding more work to your life to support the mortgage. That's not exactly the road to retirement. But when you buy a rental property, the property itself pays for the mortgage and that makes it a passive income investment. You shuffle the money around, pay the mortgage and expenses with the rents and then put the extra in your pocket. You do that until the property goes up enough in value so that you are ready to sell it. Also, a rental income stream that pays the mortgage and expenses makes it much easier to weather a real estate market downturn than with a house you live in.

Now, that's not to say that I don't want you to live in a nice house one day. I do! But I don't want your first real estate investment to be a nice house that you live in and sets you back so much that you can't make a passive real estate investment for several more years. Remember, the key to getting rich is making money in your sleep. So from a financial perspective, it is better to make the passive income investment first, harness that for a few years and then let your passive income buy you a house to live in.

Now, if you have already bought a house to live in, don't beat yourself up too much. But please let your next real estate investment be an income producing property, not a nicer house to live in.

When I first began to consider a real estate investment, the idea of owning commercial real estate seemed attractive to me. You could rent your space out to some merchant that would do all the improvements themselves, there would be no maintenance and only long term tenants. Just sit back and collect the checks, right? I talked to a friend out in California who was a commercial real estate broker. Since it was his business I thought he would just give me a few great tips on how to get started. Instead, he flat out advised against it. He said that occupancy rates go way down in a bad economy and a commercial space may then stay vacant for years. I have to thank him for that advice as I look around after this most recent recession and see most of the strip malls in my area are at least 30% vacant. I think he knew that commercial real estate is not a small investor game. A small time commercial investor can't easily weather the downturns that inevitably occur. It is also very difficult to start out small and end up with an ideal tenant like an established national chain. That will leave you renting to a lot of small mom and pop type businesses, exactly the kind I read about where 80% fail after 3 years. But with residential real estate, people will always need a place to live no matter how bad the economy gets. With residential real estate you will have a higher occupancy rate and therefore a greater chance that your investment will pay for itself from day 1 and long after.

So let's begin to make a list. Residential real estate is more reliable than commercial real estate but not all residential real estate is the same.

THE LIST:

1. Rental income producing property
2. Residential real estate

The most common question I get from friends is about fix and flips. They all want to do a fix and flip. They watch these shows on HGTV and get the fix and flip fever. This may be a catchy and intriguing term but I don't like the idea of fix and flips for several reasons. First, remember that one of the first rules of getting rich is figuring out how to make money in your sleep. For you to maximize your passive income potential you need to buy a property that pays for itself from day 1 and then hold on to it while it goes up in value. With fix and flips, you take the passive income aspect out of the equation because you don't hold onto the property. The money made on fix and flips is earned income, not passive income, because of all the sweat equity you put into the property during the renovation. There is nothing wrong with a little sweat equity, but given a choice I would rather build my equity in my sleep, not on evenings and weekends. Also, you have to pay capital gains taxes after every fix and flip but when you buy and hold, you pay taxes only once way down the road when you sell after many years. The cumulative savings effect of deferring those taxes for years is quite significant.

Another down side of fix and flips is how you introduce the significant risk of loss into your investment equation by not knowing how long it will take to sell the property. Sitting on a vacant house for several months while it's on the market could erase all of your sweat equity gains. I like owning a property where the rent pays for itself from day one and it stays 100% occupied for as long as I own it. With that situation, you never have to face the prospect of paying the monthly mortgage on an investment from your own pocket. Here in Boulder, I have a couple of friends who fix and flip high end luxury homes. Both were caught off guard by the 2008 real estate market correction. They were stuck with million dollar properties that were vacant for more than a year and the big monthly mortgages for these places put them in a great deal of financial stress. Not only did it erase the gains they made from the renovation, they are at serious risk of losing everything they have. Meanwhile, that same downturn in real estate sales prices did not affect my rents or my occupancy rates. My tenants have all been paying my mortgages this whole time and I am not hurting one bit. I can easily afford to wait a year or two for the next market upturn.

Another question I often get is, "What about foreclosures?" Buying foreclosures is a game unto itself and let's be honest, if you are beginning investor, you will not have the information or the connections to get the best foreclosure deals. There are investors and corporations that specialize in this type of investing and they are going to get the best deals out there. That will leave only marginal deals for most of the general public. Also, foreclosures are typically lower end and poorly located. They are going to be hard to sell after you fix them up. As promising as a foreclosure may look, you have to remember that if it was a desirable property, it would have been sold long before it went to foreclosure. Then there are the horror stories, foreclosed houses often have everything stripped out of them, appliances, cabinets, even the copper pipes, before they go back to the bank.

It is a myth that banks sell these properties for simply what is owed on them. Banks want to make a buck as much or more than anybody else, I can assure you they are going to sell a foreclosed property for as close to market value as they can get, which means no good deal for you. And foreclosed properties are almost always vacant. I want my property producing income from day 1. There is no good reason you should buy an empty house, each day that it does not produce rent is adding to the total cost of the property. Foreclosure mean a lot of extra work on a poorly located property that will be hard to sell or keep occupied. Who wants that?

So, I am a long term, buy and hold type of guy. I want to take a long ride on a property that is paying for itself and spinning money from day 1. Although I have met several people who do fix and flips, I have never met a rich one. (Or, for that matter, one that wasn't stressed out all the time.)

So if you have followed my logic so far, our best options are:

THE LIST:

1. Rental income producing property
2. Residential real estate
3. Long term buy and hold.

I should back up here a moment. The money-maker in residential real estate is the bedroom. A 3 bedroom unit rents for more than a 2 bedroom unit. It usually doesn't matter how many bathrooms, living rooms or kitchens are in a place, the money mainly comes from the number of bedrooms. Conceptually, each bedroom is a box that makes you money. I will go into detail on how to price a property later but the first thing I do when looking at an investment is figure out the price per bedroom. That way you can compare a 4 bedroom single family home to a 7 bedroom duplex. In my area, each bedroom will make around $800 a month. So what we are really doing with our real estate investment is buying these bedrooms, these "boxes" that make us $800 each month. With that idea in mind, we want to buy a property with 2 things: a good price per bedroom and the cheapest loan to buy them with.

Our next choice would be what size of long term residential property to invest in. There is a sweet spot with residential real estate. Not too big, not too small, but just right.

I avoid single family homes for a couple of reasons. Remember that when you buy a property you are really buying two things, the land and the structure on the land. With a single family home you are buying a lot of land compared to the number of bedrooms (money spitting boxes) on that land. The land itself doesn't make any money from month to month, the bedrooms do. So, you want your purchase money to buy a lot of bedrooms and a little land. With the math of single family homes, they usually are not enough bedrooms to allow for a good price per bedroom. That also means that there rarely will be enough bedrooms in a single family home to make the property pay for itself. Also, there are zoning laws in most cities that limit the number of unrelated people that can occupy a single unit to 3 or 4. So even if you find a 5 bedroom single family house, you may not be able to legally rent it to 5 unrelated people.

I like duplexes, triplexes and 4-plexes. This configuration will allow for more than one unit on a property, giving you a higher number of bedrooms on that lot to make money. Another important thing I like about 2, 3 or 4 unit properties is that the financing is still considered residential and generally as easy to get as single family home financing. Also, your mortgage interest rate will be cheaper and more competitive than a commercial loan. Residential loans are given for 1-4 unit properties but when you consider buying a 5 unit property or higher, (such as a small apartment building) you may get a good price per bedroom but you have to finance these types of properties with a commercial loan. The cost of your mortgage will jump considerably, often by as much as 4 percentage points over residential financing. That adds up when you are looking at a large loan.

So my ideal real estate investment choice so far is:

THE LIST:

1. Rental income property
2. Residential real estate
3. Long term buy and hold.
4. Duplex, triplex and four-plex

The first guy I ever knew who made it big in real estate did it in San Angelo, Texas. He was one of those guys that bought houses by putting signs on telephone poles that said, "Cash 4 Your House." He ended up with some great buys on about 50 low end single family homes that he bought from distressed sellers. The average house was worth $50,000 so his real estate portfolio was worth about $2.5 million. Sounds good right? Well, there were definitely problems. While his purchase price may have been great on the properties, usually they were not well located and my friend had a hard time keeping them occupied. Also, these properties were cheap because they were in poor condition. My friend not only had to do a lot of initial renovation but the ongoing maintenance on the properties was quite high. Think about it, he had 50 roofs to maintain, 50 water heaters, 50 yards to mow, 50 sets of sad stories that go with low income tenants who are late on rent. When I left San Angelo, he had 3 full time maintenance workers and spent most of his days managing those houses.

I thought about him when I began investing in real estate and it made more sense to me that if I had his $2.5 million to invest in real estate, I would go with a couple of million dollar properties instead of 50 cheap ones. Think about it- only 2 roofs to maintain for the same amount of money! Not only would the maintenance be much less, but properties that are premium located have lower vacancy rates. Also, higher end properties attract better, more stable tenants. Another good reason is that in market fluctuations, high-end properties appreciate faster in rising markets and hold their value better in downturns.

Now just because I like to invest in high end properties doesn't mean I like to pay top dollar for them. One of your primary responsibilities will be to know local real estate prices so well that you will be able to recognize a steal on a premium piece of real estate the first day it comes out on the market.

So, we narrow our ideal investment choice a little further to:

THE LIST:

1. Rental income property
2. Residential real estate
3. Long term buy and hold.
4. Duplex, triplex and four-plex
5. Higher end

It never occurs to most people that geography and real estate are closely tied. Have you ever thought about why New York City, San Francisco and Aspen are the most expensive real estate markets in the U.S.? It's no accident. The thing they have in common is that they are geographically restricted. Manhattan is on an island, San Francisco is on a peninsula and Aspen is in a small valley surrounded by unbuildable mountains.

Now think about the softest real estate markets, the ones that are slowest to appreciate. They also have something in common. These cities are on usually on endless flat land. I grew up in Dallas and I have seen the urban sprawl spread as builders endlessly add subdivisions to the edge of the metroplex. Las Vegas is another example of a flat area built out until it became a bad real estate market. With all that abundant, cheap land to build on, the new supply of housing stays ahead of demand and keeps real estate sales and rental prices flat.

One of the most often overlooked principles in real estate shopping is to buy in a place where the supply is less than demand. Look, you will be able to find some absolutely great deals on properties in Kansas but that doesn't mean you should buy them. A market like that simply won't go up in value as much as in a place that is geographically restricted and in demand. You need to look for mountain towns and ocean side towns if you want a consistent rise in property values. I chose Boulder, Colorado: not only a mountain town but one that limits new growth and development. Both those factors have pumped up the price of my real estate holdings by keeping demand high and have also kept me immune from this last real estate downturn of 2008/09.

So let me add to our description of the ideal real estate investment.

THE LIST:

1. Rental income producing property
2. Residential real estate
3. Long term buy and hold.
4. Duplex, triplex and four-plex
5. Higher end
6. Located in geographically restricted areas such as coastal or mountain areas.

So now you have an idea of what type of real estate to look for, the next thing you need think about is your type of tenant. Most don't realize they have a choice here but actually it's an important one. You can rent to Section 8 welfare recipients or you can buy and rent property in a senior citizen community. The most desirable type of tenant that comes to most investor's minds is that of a nice, normal working family. Well, there is often a problem with those "average working" people. Here's the truth: the most successful working people don't rent, they buy their own house rather early in life. That leaves a second tier of working people that aren't so normal. It has been my experience that this group of renters tends to undergo a lot of transition. They get transferred and have to move, they lose their job and can't pay the rent, they get divorced and either have to move or can't pay the rent, they have a kid and can't pay the rent, they get married and have to move, or in the biggest irony with a great tenant, they are buying a house and have to break the lease. Now I know these are all legitimate reasons for leaving but when I sign a year lease with a tenant, I want them to stay for a year and pay rent for a year. It seems such a simple idea but there is always some transition with "normal working" people that never makes renting to them as easy as it sounds.

With college students rentals you have a much safer demographic. These are upper and middle class young people whose main difference is that they are captive tenants. They are usually in town for 4 or 5 years until they get their degree and when you rent to them for a year, they stay for a year. Even during the summer, because nowadays students don't go home to work and live with their parents like we used to. I know that all this sounds counterintuitive because the first image that comes to mind with student tenants is a scene out of the movie, "Animal House". But the truth is different from that, especially when you keep in mind that higher end student rentals are what we are looking for. Many college students come from very affluent families and grow up in million dollar homes. Their parents don't want them to live in an old, run down place or in a party house either. They are actually willing to pay premium rents to have their child live in a nice place while they go to school.

With college students, not only do you have captive tenants that rarely move out, you also have tenants that almost always pay their rent on time. Sometimes they are late because they forget but rarely has a college student told me they cannot afford to pay their rent. Why? Because most of these higher end college tenants have $100,000+ college funds backing them up. Their parents have been saving their whole life for college expenses!

I'm about to go into more reasons why college student rentals work but let me lay out this conclusion first. After making all the best choices when it comes to how to invest my money, I choose:

THE LIST:

1. Rental income producing property
2. Residential real estate
3. Long term buy and hold.
4. Duplex, triplex and four-plex
5. Higher end
6. Located in geographically restricted areas such as coastal or mountain areas.
7. College student tenants

I have talked about geography on the big scale and the importance of finding restricted towns but it also important to consider geography on a smaller scale. Where is the best place in that town to have your rental? Well, if you are renting to college students you need to buy properties near the university. Not only do you need to be near them but within walking distance of the main campus. This is very important because almost all parents want their child to be able to walk to classes. Location is usually their number one concern when looking for a place to rent. Parking is a problem at bigger colleges and parents simple do not want their kids commuting to class. They are willing to pay a lot more for a place where their son or daughter can walk to class all week long.

Now this implies a very important consideration. If you are buying student rentals, you need to buy them in a town that has a university with a centralized campus, not something that may be spread out like a community college. That makes our criteria list looks something like this:

THE LIST:

1. Rental income producing property
2. Residential real estate
3. Long term buy and hold.
4. Duplex, triplex and four-plex
5. Higher end
6. Located in geographically restricted areas such as coastal or mountain areas.
7. College student tenants
8. Within walking distance of a main university campus

There is one more step in the geography process: because high end is better than low end, you will need to buy your property in the best student rental neighborhood near that big campus. It won't work to buy in the midst of some nice single family, owner occupied homes. College students are much more noisy and nocturnal than older people and you will end up with too many complaints from the neighbors. Usually, the students have a most desired neighborhood and it's important that you find out what it is. For instance, one side of campus may be much less favorable than the other side of campus. One side of campus usually has a shopping and drinking district and that may be the best place to buy. So, let's add one last item to the list:

THE LIST:

1. Rental income producing property
2. Residential real estate
3. Long term buy and hold.
4. Duplex, triplex and four-plex
5. Higher end
6. Located in geographically restricted areas such as coastal or mountain areas.
7. College student tenants
8. Within walking distance of a main university campus
9. In a coveted student rental neighborhood

I know…It sounds like I am asking a lot. To find a high end, multi-unit student rental property within walking distance of a large university campus in a student rental neighborhood in a geographically restricted town is not the easiest thing in the world. But like the cliché, if it were easy, there would be a lot more rich real estate investors out there. Do you see that this formula adds demand, value and security for your income property at every level? Even though it takes a lot of work to find the right type of investment that meets all these criteria, at the end of this process you will end up with a property that is rarely if ever vacant and commands premium rents no matter what the economy does.

What happens if you don't take the time, do the footwork and find a property that meets all the criteria? Well, you will get less appreciation over time, lower rents and a higher vacancy rate. So you may save $50,000 or more on a purchase price if you find a property with only 7 or 8 or the criteria above but you won't be saving money in the long run.

How do I know? I tried it. After my initial success in Boulder, I was eager to share the formula with my brother in Dallas. We bought a duplex in a very desirable neighborhood in North Dallas near SMU. We got a great price on it and some cheap financing too. Then we waited… and waited… after 10 years the price never went up. Then the recession hit and we had a 6 month vacancy in one of the units. In 2010 we sold the property for less than we bought it for 7 years earlier. How did this happen? We omitted one of the most important criteria and did not buy in a geographically restricted area. The supply always exceeded demand in the Dallas area and when the economy went bad, lots of builders were left with houses at fire sale prices. This dragged down the whole Dallas real estate market. Meanwhile in Boulder, there was not a lot of new growth (because of the geographic restrictions) and therefore no influx of vacant inventory into the market. The rental and sales market held steady in Boulder while it dropped dramatically in Dallas, all because of geography.

You may find a 6 bedroom duplex in Dallas for $400,000 and a 6 bedroom duplex in Boulder for $600,000. For reasons I will go more into in the How-To-Buy section, you will probably be better off in the long run buying the more expensive, better located property.

1. Student rentals tend to sell below market value because of their below average condition but they tend to rent above market rates because of their location, every parent wants their kid to be able to walk to campus. Simply put: You can buy for less and rent for more.


2. Universities are like businesses: they need to grow. They need to increase their enrollment to get more tuition income and more state and federal funding. Here is an astounding fact: for each 3 new students that a college increases in enrollment that creates the demand for one more new student rental unit. In Boulder, the university increases total enrollment by about 300-400 students per year. That means they create the demand for 100-130 new rental units in Boulder every year. Well, remember, this is a geographically restricted area and there is no easy place to put all those new units. The end result is much more demand than supply, premium rents and 100% occupancy year after year.


3. Your occupancy levels will be much higher than "normal" rentals. Students line up their rentals and sign leases 3-6 months in advance of the move in date. This is not the case with normal working people where every "normal" changeover runs the risk of a one or two month vacancy between tenants. The lease term for college rentals usually runs from August to August and the students want to have their living situation sorted out sometime in the spring before the semester ends and they leave town. Also, there is some competition to sign leases as early as possible, so you will have your units pre-leased months in advance of the lease end date.


4. College students have predictable times that they will be gone from their house. During Christmas break or Spring break, they usually leave the property to go on vacation for a week or more. That is good for you if you are planning major renovations like painting, redoing a bath/ kitchen or replacing flooring. You can get these big tasks done with no loss of rent.


5. Inflation will affect your loan but not your rent. This is truer with a fixed rate loan but also applies to variable rate mortgages as well. Once you have lined up your financing, you are going to be tied to a somewhat fixed number when it comes to your monthly payments. Let 10 years go by and you will be paying a loan you made in 2010 with 2020 value dollars. Think about it this way, wouldn't you like to buy something that had a 1985 price tag on it? Well, with a fixed rate loan, the payment is going to stay pretty much the same for 30 years… so, 10, 15 or 20 years down the road, as inflation kicks up the number of dollars that it takes to buy things, your loan will be locked at a constant price… But your rents will be doing something completely different. Each year you will be raising your rents to compensate for inflation and other costs. One of the key factors in how much your raise your rents each year will be the Consumer Price Index. This is a measure how much inflation raises the price of consumer goods from one year to the next. In my area it has typically been around 3%. So each year I make sure to raise my rents at least 3% to keep up with inflation. I also add a little cushion to keep up with naturally rising expenses so that my total rent increases are closer to 5% a year. So, my rents are going up 5% a year while my loan stays at the same number. Let that happen for 10 years and you are going to have some seriously positive cash flow.


6. With student tenants you have a captive audience. In other words, there will be a large number of customers looking for places near campus every year. Not only is there a steady stream of customers but they are going to be there for at least a year. Normal working family tenants are much more likely to want to break a lease in the middle of the term because they have lost their job, getting a job transfer, had a kid or getting a divorce… The list goes on and an unexpected vacancy can really put you in a bind. With student tenants you don't get those types of excuses. They are there from August to August. What about during the summer? Don't the students leave for the summer? I would say that while it was true of my generation that we went home each summer to live with our parents and work, that doesn't seem to apply to today's college student. The last thing they want to do is go home and live with Mom and Dad. They have gotten good at taking a few courses in summer school to be able to stay away from home.


7. Student tenants are young but very trainable. Many people already with investment properties shudder at the thought of going into student rentals. For some reason, they imagine that dealing with very young people will be arduous and hard on the property. Well, let's think that through. First off, you will always be dealing with college educated people so there is a certain positive class level that you are renting to. Plus your tenants are students; they are at that point in their life where they are learning things. If you prepare them as to how you expect they treat your rental and fulfill their lease, you have the type of tenant that will listen to you. Conversely, there are older 'normal' tenants who are experienced at scamming a landlord, riding the edge of eviction laws to get months of free rent. You will not have to deal with a con artist when your tenant is a first time renter. A landlord-tenant relationship is a lot like a marriage and there will be stressful situations that you have to get through. You will need to get into your property from time to time for repairs, for lease/sale showings or routine maintenance. Rarely will you have more flexible tenants than 20 year olds. With a little notice, you can usually get in and out of your properties with no problems. They are generally very easy to work with compared with older tenants who are just weird about you coming into their living space.


8. Your tenants are backed up by the Bank of Mom and Dad. When you do top end student rentals, most of your tenants are going to have big College Savings Accounts financing their expenses. The parents have saved their whole life so that they could go to school. That happens to be a very good thing for you. If a student tenant has a $100,000 college fund, their parents will not care if the rent is at a premium above market rates as long as they live in a nice place and can walk to campus.


9. Your occupancy levels will be near 100%. In Boulder, as I write this, the vacancy rate for housing in the University area is 0.8% while the vacancy rate for the city as a whole is 5%. You will always have a greater demand for a well located, top end student rental than there will be supply. You also have about a six month pre-leasing window to get it rented out before the current tenants leave instead of the usual 30 days notice that 'normal' working tenants give you before they move out.


10. There are enormous tax advantages to student rental income properties. You will be allowed to deduct your mortgage interest and depreciation every year. Also, there is a huge tax loophole called a "1031 exchange" that will allow you to sell your property and transfer/defer your tax burden if you buy another income property within 45 days. This tax break allows you to sell and move up into a bigger income property without incurring a tax liability. You won't see that happen in the stock market.

Here's an important digression before I get into the best type of real estate investment. In the last page or two, I have described how I gradually lowered the risk of my investment but I have not mentioned how I greatly increased my return.

The number one reason I am rich from real estate is because of leverage. Without leverage I would not have been able to safely make 54% a year on my money. Leverage is one of those concepts that is a little vague until it's explained properly. Here goes. Leverage is the ability to put a little of your money into an investment and then borrow other money to buy more of that same investment, thereby using your initial investment as collateral for the loan. The reason you would do this is to magnify your profits as your investment goes up. Leveraging makes a lot of sense at first. I mean we wouldn't make an investment unless we were pretty sure it was going to go up in value. So why not make the bet 3 or 4 times bigger by leveraging your investment? Well, be careful, because there is a huge difference between secure leverage and unsecure leverage. With unsecure leverage you raise your risk of loss just as much as you raise your potential for gains. This type of leverage occurs typically with stock market investments. Let me give you my first stock market investment as an example of unsecure leverage.

I am a sophomore in college, it's 1982 and the price of silver and gold had dropped dramatically from historical highs. There was this buzz in my dormitory, especially from the seniors, about how it was the best time to buy silver. They thought the price of silver absolutely could not go any lower than $12 an ounce. It was the classic hot tip and my buying temperature was sky high. I had $2000 saved over the summer from painting houses. It was all the money I had saved. So I went out and bought $2000 worth of silver shares. The broker who opened my account said I could control up to 5 times my investment or $10,000 worth of silver stock if I wanted to take out a loan from them. I went home and thought about it. That week, the price of silver went up from $12.36 to $12.50. I went in the following Monday, borrowed the money from the broker and leveraged my investment the most I could (5x) so that now I controlled over $10,000 worth of silver.

Over the next three months I watched silver drop from $12.50 to $9.30 per ounce. I was sick. The broker called me and said I had to put more money into my account to cover the losses on the silver I had bought with the borrowed money. I told him I didn't have the money to cover the losses and he said no problem, we would just have to sell some of my initial silver shares. He sold all but $500 of my silver stock and then asked me if wanted to leverage that. I didn't. I cashed out the rest of my silver stock which, after fees and another dip in the price of silver, came to $440. I was in shock at losing over $1500 of a $2000 investment. It would take months of hard work to earn it back. I wish I had known then that this broker was acting only in his interest, making extra commissions by giving me bad advice about leveraging.

When you buy real estate, you can also leverage your investment by putting a small down payment on a property and then taking out a mortgage loan for the rest. For income properties it is common to put 20 or 25% of your own money as a down payment and then get a mortgage for 4 or 5 times that amount to pay off the rest of the purchase price. It's the same ability to leverage your investment as stock but with the right real estate you can do it without increasing your risk of loss. You do this by getting a loan on a property that will pay for itself even in bad economic times. Think about that: you can increase the earning power of your money by 5 fold without a corresponding risk of loss. How? Well, by doing your homework and finding a real estate investment that pays the mortgage with its rents from day 1 and has a very high chance of staying 100% occupied. As long as your property cash flows from day 1 and there is no vacancy, then you will be able to pay the mortgage and expenses no matter what, even through a real estate market downturn. You will be able to ride out a recession because everything is paying for itself while you wait for the market to go back up.

Student rentals possess the qualities that will allow you to leverage safely and because real estate is a tangible asset, it is easier, cheaper and safer to leverage than stocks.

HOW YOU TURN 10% A YEAR INTO 50% A YEAR

Can you see the beauty of leverage? It lies in the fact that even though you have put down only 20% of the value of an investment, you get to keep 100% of all the profits that the investment makes? This is a very important concept and this is where a lot of people's eyes glaze over, so stick with me and let me explain it another way….

Suppose we have $20,000 to put down on a rental property worth $100,000. It's my 20k plus an 80k loan from the bank. Now let's assume I do my homework, buy wisely and get the rental to pay the mortgage from day 1. Then let's suppose the property goes up 10% that year. Now the house is worth $110,000. See how I get to keep all the increase in property value even though I am mostly using the banks money to buy it? So I made a 10k profit that first year, the difference between the $100,000 purchase price and the $110,000 its worth now. The magic lies in that I put only 20k of my own money into this property? In essence, after one year I made $10,000 profit on my $20,000 down payment. That's a 50% return! And safely leveraging the banks money on top of yours is how you do that.

Sound crazy? It's not. It's just an amazing niche that I discovered where there is very little risk and a potential for very high rewards. Let's look at some of the scenarios: In my area of Boulder, Colorado the twenty year average for real estate prices is an 11% increase per year. So if I buy a property with 20% down and real estate prices go up 11% that year, I just made 54% return on my down payment. One year, 1998, prices went up in Boulder by 29%, which gave me a 140% return on my down payments. This last year, 2009, the real estate market has been pretty hard hit and Boulder prices have remained flat or lost a little in value. But that's okay. I am buying and holding, right? That means that in an off year, I may not make any capital appreciation but I am not losing any money either because the rents are paying the mortgage. So, in average years, you make a 50% return on your money, in great years it can be much more than that and in bad years you are treading water and patiently waiting for the next real estate market upturn.

After losing $100,000 in the stock market, I may be the most risk-averse person you know. I can't stand losing any more money but then again, I don't want to invest in CDs. With real estate leveraging I have found a way to get huge returns with minimal risk. The key is in doing your homework and finding the right real estate investment that will stay occupied and steadily go up in value.

GOOD DEBT VERSUS BAD DEBT

A whole lot of people get freaked out about taking on a big mortgage. They don't want to get into debt. To them all debt is bad debt. Well hold on a minute, there is such a thing as good debt. If you borrow money and then invest that money safely so that it pays all the costs of the loan plus some extra, then that is good debt. A solid real estate investment creates debt that is much better and safer than credit card debt or stock leverage debt. The chances of you paying for student rental debt out of your own pocket are practically zero if you take the time to choose your real estate investment wisely. Here's a perfect example of good debt and the power of leverage:

I have a friend and it was real important to him to own his house free and clear of a mortgage. For him that would provide the security so that no matter what happened with his career he would always have a place to live. Well, a few years ago he ended up outright owning a nice house worth $500,000 and he was happy and felt secure since he didn't have a mortgage to worry about. At the same time I had 5 student rental properties in the same neighborhood and all worth about the same as his house. But I didn't own mine outright, I had 20% equity in each one, that's what I had put down to purchase each property. So, the value of his real estate was $500k and I also had a total $500k of equity in my 5 houses. (In other words, I had $100,000 of my own money as down payment equity on each of the 5 houses and a $400,000 mortgage on each house as well.) In the beginning we both had the same amount of equity in our real estate ($500,000). But when the market went up 10% a year later, something profound happened. His one house and his total real estate worth was now $550,000. (So he made $50,000 in equity from his real estate investment in a year.) But I had 5 houses that had gone up 10%. Each of my houses was also worth $550,000 and I also made $50,000 equity on each of them but my net real estate worth was now $750,000! (5 times the $150,000 equity I now had in each of the houses) With the same beginning amount of capital, I had made $250,000 where my friend had only made $50,000. I made $200,000 more than him that year because I was not afraid of good debt and I used the power of safe leverage to multiply the earning power of my investment.

BACK TO THE CONCEPT OF LEVERAGE

Now let's take a look at why it would be a safer, more secure way to leverage your money. Lets us some numbers that compare to those silver prices I used earlier. Say I take $20,000 and put it as a down payment on a $100,000 student rental property. By getting an $80,000 mortgage, I have just leveraged my $20,000 five times and harnessed it to a $100,000 investment. I have done my home work and found a well located property near a university campus that is already occupied and able to pay for its mortgage with the rents from day 1. Because of its great location, I have no problems renting it out from one year to the next. Now let's say the real estate market goes bad and my $100,000 house goes down in value 20%. Well, here is where we see the difference in secure and unsecure leverage. In an unsecure leverage, you will have your stock broker calling you and asking you to put down more money to cover the losses. In a secure leverage such as real estate, the bank doesn't care what you do as long as you keep paying the mortgage. And one great thing about real estate is that sales prices may go down but rents hardly ever do. So, in a worst case scenario you bought a student rental income property for $100,000 and then it went down in value. Well, you are in this for the long haul. No big deal, you just keep it rented and keep paying your mortgage until the market rebounds. You may ask, well, what if the house goes does so far in value that it is upside down. In other words, you owe more on it than your mortgage is worth. If you follow my advice on picking well located properties in geographically restricted areas, you should not have that problem. When all of the country was abuzz about the hot Las Vegas real estate market in 2004-2007, I did not agree with them. I don't think you should buy property in large flat places where cities can sprawl indefinitely and housing supply can easily outpace demand. Keep your property choices to geographically restricted areas where demand is always high and you will do fine with your securely leveraged investment. But what about in the more common scenario where housing prices go up a little bit each year? Many housing markets in the U.S. have averaged 5% per year or more over the last 20 years and when you leverage small gains like that, get ready for some big returns.

Levi Brown has developed two e-books that complete the outline of his incredibly successful business model. In 'HOW TO BUY STUDENT RENTALS' he will guide you through the buying process and show you how you can make a $100,000 in a day! There are many traps out there in the home buying process and with this e-book, Ford Brown guides you through the pitfalls and shares his invaluable experience so that your first purchase can be a grand slam investment. In 'HOW TO MANAGE STUDENT RENTALS' he will show you the management system he has carefully developed over 15 years. The incredible methods outlined in this e-book will not only maximize your net profits each month but also help you to avoid the stress and frustration that can come with being an inefficient landlord. With the ideas outlined here, you may not need to hire an outside property manager and that will save you an extra 10% in gross revenues! 'HOW TO BUY STUDENT RENTALS' & 'HOW TO MANAGE STUDENT RENTALS' are in their final edit and will be available soon. The original price structure for these 2 money making reports is $19 each or $29 for the pair. But now, if you e-mail us and get on the pre-order list, you can have both books for $19 total! Please email your questions and pre-orders to Levi Brown at: levi@studentrentals.com And let him know what you think of this new site and that you are ready for more info. Thanks!