Real estate investor and businesswoman Barbara Corcoran has revealed her "golden rule" in making a successful real estate investment.
Speaking on the BiggerPockets Real Estate Podcast last month, Corcoran said her "golden rule" has two main parts. The first part is being able to purchase a real estate property with at least a 20% downpayment. Ideally, the property should be located in an area with an increase in demand.
The second part of Corcoran's golden rule involves renting out the property to tenants who can pay the mortgage and help the owner break even.
"That has always been my golden rule. Buy a property with 20% down. [That] has always been my formula because they used to do with 10%, but it's not possible anymore. I repeated that formula again and again and again, and then making sure the tenant has paid my mortgage. It's pretty easy that way," she said during the podcast.
"If I break even, I'm smiling all the way to the bank. And then by the second year, third year, New York is a magical place. The value always goes up, and then I start getting a lot of cash. Then I refinance, pull a lot of cash out, refinance, pull cash out. Real estate is magical if done right," she added.
The Golden Rule
Corcoran herself used the "golden rule" when she borrowed $1,000 from her then-boyfriend, quit her job as a diner waitress, and launched her real estate office in New York City. She later sold the Corcoran Group to brokerage firm NRT for $66 million in 2001.
Corcoran is currently believed to have a net worth of $100 million. She has since appeared on the ABC TV program "Shark Tank" where she has invested in more than 100 businesses. The largest investment she made on the TV show was $350,000 for 40% of Coverplay.
Despite Corcoran's success with using the "golden rule," other real estate investors warned that the approach is not a "one-size-fits-all" solution.
"Each investment protocol is entirely unique and different," Alex Blackwood, CEO and cofounder of real estate investment platform Mogul Club, told Fortune. "For instance, maybe an investor's credit score is better so they can take out more with less monthly costs, or maybe interest rates are lower so an investor can increase leverage and still break even."
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