Option 101: Beginner’s Guide
Want to become an options master? Options expert Nic Chahine’s free report includes 4 perfect tips for beginners, the secret to earning 411% in options, and proven tips for success. Provides access to “Plans”. Get your free copy of Options 101: The Beginner’s Guide as soon as possible.
Like many investors, “Shark Tank” star Barbara Corcoran started small when building her portfolio. Ironically, she had no intention of becoming a real estate mogul when it all started. Corcoran’s real estate adventure began after failing at various jobs one after another and deciding to try his hand at property management.
She borrowed $1,000 from her then-boyfriend and started a property management business out of a small office in New York City. It was during this period that Corcoran developed what he called the “golden rule” of real estate investing. The rules require investors to put down 20% of the property and get a tenant whose rent payments cover the mortgage.
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Over time, the property appreciates in value, and once the mortgage is paid off, the rent paid by the tenant turns into residual income. Eventually, the mortgage is paid off and all tenant rents, minus management fees, insurance, and property taxes, become the owner’s pure monthly profit. By repeating this method, you’ll have a great portfolio of income properties that will support you for the next 10 years or so.
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Corcoran is living proof. She used this technique to grow her Corcoran Group real estate company into a powerhouse worth $66 million, which she sold to real estate giant NRT in 2001. However, there are significant issues that prevent modern investors from copying Corcoran’s method.
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Mr. Corcoran is in his 60s. I mean, it was about 40 years ago that she started her real estate empire, and back then, her 20% down payment on a $50,000 property was her $1,000 down payment. Fast forward to today, and $1,000 barely gets her an iPhone, but this is not an income property. You might have to take a time machine back to the Carter administration to find out when she was able to buy a New York City income property for $50,000.
These days, the 20% down payment on a $250,000 property is $50,000. If you’re looking to invest in New York, Los Angeles, Chicago, or any other major American city, single-family homes can cost more than $1 million. Income properties and commercial real estate in prime locations will likely cost several times that amount. Yes, by following Corcoran’s Golden Rule, you can put your real estate equity in a good position to get an affordable mortgage.
However, at today’s prices, only a small percentage of investors have the necessary capital to make a 20% down payment on an investment property. This is one of the main reasons why real estate crowdfunding, fractional ownership, and real estate investment trusts (REITs) have become so popular.
Even if you only have $1,000 to invest, you can still find products on platforms like Arrived and CityVest. Other platforms such as Yieldstreet, RealtyMogul, and EquityMultiple have minimum investment amounts of $5,000 for products in various real estate sectors. While this won’t get you a 20% stake in these properties, it’s a good way to start small and build a successful portfolio of passive income producing properties.
Corcoran’s 20% rule is still a fundamental part of successful real estate investing, even if 20% is more than most investors can afford. A possible adaptation is to buy small slices of different properties until all of those small slices add up to a complete pie that can sustain you in retirement or increase your income. That’s it.
The good news is that with a few tweaks to Corcoran’s approach, it’s still possible to build your own real estate empire. Remember, Rome wasn’t built in a day, and big things start small. If you approach real estate and other investments with this mindset, you’re more likely to win in the long run.
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- Collecting passive income from real estate has become much easier. A new real estate fund backed by Jeff Bezos gives you instant access to a diverse portfolio of rental properties and costs just $100 to get started.
Option 101: Beginner’s Guide
Want to become an options master? Options expert Nic Chahine’s free report includes 4 perfect tips for beginners, the secret to earning 411% in options, and proven tips for success. Provides access to “Plans”. Get your free copy of Options 101: The Beginner’s Guide as soon as possible.
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