Barbara Corcoran’s “Golden Rule” Of Real Estate Investing

Key Takeaways:

– Barbara Corcoran, founder of the Corcoran Group, shared her strategy for success in real estate investment on a podcast.
– Her “golden rule” of real estate investing consists of two components: purchasing properties with at least 20 percent down in up-and-coming areas, and having tenants pay the mortgage.
– Corcoran initially allowed herself to put down payments of 10 percent, but has increased that percentage over time due to rising housing prices and interest rates.
– The goal in property investment should be to break even initially, which can be achieved by putting down 20 percent.
– Over time, as property values rise and mortgage rates decrease, investors can start to see returns.
– Corcoran values residential tenants more than commercial tenants, as residential tenants tend to rent for longer periods and it is easier to increase rents once leases end.

inman:

On a recent podcast, the Corcoran Group founder shared her strategy for success in real estate investment that she says has helped earn her a net worth of $100 million.

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Famed real estate investor and Corcoran Group founder Barbara Corcoran says sticking to her own “golden rule” of real estate investing has helped her earn millions of dollars in the real estate market.

The “Shark Tank” star recently went on the “BiggerPockets” podcast where she broke down her two-part system for investing in real estate that she says helped earn her a net worth of $100 million.

The golden rule 

Corcoran’s “golden rule” is made up of two key components. The first is being able to purchase properties with at least 20 percent down, ideally in an up-and-coming area that is seeing demand increase. The second is to have tenants at that property paying your mortgage, according to Corcoran.

“If you can buy a property with 20 percent down, you break even, you get the tenants to pay your mortgage, you always make money,” Corcoran said. “And if you can saddle onto the back of an up-and-coming area, you’ll make a lot of money.”

But similar to the real estate market itself, Corcoran’s golden rule has changed over time. She initially allowed herself to put down payments of just 10 percent when purchasing a property, but as housing prices and interest rates have increased, she has increased her down payment percentage to compensate.

Aim to break even

Corcoran was asked by podcast host David Greene whether the goal in property investment should be just to break even or to have an income-producing property. Corcoran said it’s important to start out by breaking even, which she says can only be achieved by putting down 20 percent initially.

Breaking even in the first year or so of property investment is normal, but as property values rise and mortgage rates decrease over time, investors can begin to see some returns, she said. Corcoran cited as an example a property she purchased with a 20 percent down payment, then waited 20 years before selling it at a true profit.

Not all tenants are created equal 

For Corcoran, residential tenants hold more value than commercial tenants. While residential tenants tend to rent their homes for extended periods of time, commercial tenants see the space they are renting as little more than an investment and will leave as soon as they feel it is no longer a worthwhile expense for them.

Residential leases are also shorter than commercial leases, Corcoran noted, meaning it is easier to increase rents once leases end.

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Property Chomp's Take:

Barbara Corcoran, the founder of the Corcoran Group and a well-known real estate investor, recently shared her strategy for success in the industry. With a net worth of $100 million, Corcoran's approach to real estate investment has clearly paid off.

Corcoran's "golden rule" of real estate investing consists of two key components. The first is purchasing properties with at least a 20 percent down payment, preferably in up-and-coming areas experiencing increased demand. The second component is having tenants at those properties pay the mortgage. According to Corcoran, if you can buy a property with 20 percent down and have tenants cover your mortgage, you will always make money. Additionally, investing in an up-and-coming area can lead to significant profits.

However, Corcoran acknowledges that her golden rule has evolved over time. Initially, she allowed herself to make down payments of just 10 percent when purchasing properties. But as housing prices and interest rates have increased, she has adjusted her down payment percentage to compensate.

Corcoran also emphasizes the importance of aiming to break even in the first year or so of property investment. She believes that by putting down 20 percent initially, investors can achieve this goal. While breaking even may not seem like a significant achievement, it sets the foundation for future returns. As property values rise and mortgage rates decrease over time, investors can begin to see profits. Corcoran cites an example of a property she purchased with a 20 percent down payment and waited 20 years before selling it for a true profit.

Furthermore, Corcoran places more value on residential tenants over commercial tenants. Residential tenants tend to rent their homes for extended periods of time, while commercial tenants view their rented space as a mere investment. Consequently, residential leases are shorter, making it easier to increase rents once leases end.

Barbara Corcoran's success in real estate investment is a testament to the effectiveness of her golden rule. By purchasing properties with at least 20 percent down, finding tenants to cover the mortgage, and investing in up-and-coming areas, investors can increase their chances of making significant profits in the real estate market. Following Corcoran's advice may just be the key to achieving financial success in the industry.

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