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To listen to all of our archived shows please subscribe to our iTunes podcast.View Our Expert Profile for Barbara Corcoran
Barbara Corcoran is the founder of The Corcoran Group, which she started at the age of 23 by borrowing one thousand dollars and quitting her job as a waitress. Today, The Corcoran Group is one of the most famous real-estate companies in the country. It is a multi-billion dollar business, employing thousands. Barbara is also the real-estate contributor on “The Today Show” and CNBC, has regular columns in The Daily News and Redbook Magazine, and gives speeches all across the country. She is the author of If You Don’t Have Big Breasts, Put Ribbons on Your Pigtails: And Other Lessons I Learned from My Mom. She shared her thoughts on the first 30 days of starting a business and making more money in real estate.
What is the most misunderstood thing about real estate?
The one thing I think people don’t realize is right now [this is] the market that everyone has been dreaming about. There is a lot of inventory, a lot more options, desperate sellers, cheap money and at the same time, low interest rates and a lot of uncertainty. That’s the kind of market where you can get your first house if you’ve got the courage to do it.
Is real estate for everyone?
No, I don’t think so. I think real estate is for you if you want to have a home. After all, you’ve got to live somewhere. And, no matter where you live or what you’ve paid, it’s always better to pay yourself and have forced savings of paying off your mortgage every month. However, as I said, I don’t think real estate is for everyone. I think real estate has risk associated with it from the start, because you are putting your money down on a bet and hoping that you are picking wealth. I think if you are going to worry yourself and are not comfortable with the risk aspect of real estate, then real estate is not for you. Lastly, I think you have to have a little bit of a love affair with real estate, like a good marriage to see you through the bad times. I think you have to give some thought to whether you are the typical real-estate investor who does well in the first place and stays with it. Those are concerns that very often people don’t think about.
What mistakes do people make?
One of the most ridiculous mistakes I made was with my very first real-estate investment. It was an eleven-unit small motel with a full lake view, and it was a dump, an eyesore to the neighborhood. As a little do-gooder, I thought, “hey, we’ll take that motel down, build something else, and on top of that we will have a great real-estate investment for the rest of our lives here.”
I never bothered to check to see if the tenants were paying their rent. They all had signed leases, but there was only one out of eleven people who had paid their rent in the last year. It was really a charity motel. Collecting back rent was impossible, the people had no income. It was like a retirement home. I would never buy another investment vehicle without seeing the leases and the rent receipts to make sure the rent is coming in. The second thing I learned with that motel is never to buy a piece of property without a clear understanding of what you are going to do or are allowed to do with it. I thought it would make a great vacation area or some weekend condos. I never actually checked with the town to see what the zoning ordinance was—it had to be a motel site.
You need to do due diligence—the most boring term in the world—whether you do it or your attorney does it. But you’ve got to check out what you would usually assume to be fact, and you have to check the rent rolls. What’s great about real estate, if you’re meant for it, is it’s forgiving. You could be an absolute dunce, and do all the wrong things on every fourth property, and you can still make a ton of money. Real estate intrinsically goes up in value over the long haul, and it quietly makes profits for appreciation, whether you’re getting a good return month-to-month. That’s how people get rich in real estate.
So can people make money in real estate?
Most people make money in real estate, even in this current terrible financial debacle we all find ourselves in throughout the nation. The great majority of people who are living in houses right now have homes that are worth much more than they originally paid. The only ones who have to question their homes’ value are those sitting in houses they have bought in the last two years. Those are the homeowners that, many times, have paid too much, not knowing how the real-estate market would shake out.
If you look at the National Association of Realtor’s report, two out of three metropolitan areas in the United States are still going up in value, but there is so much negative publicity that you’d think that every market was losing value. It’s only one-third of the markets that have been hit and are losing value. Two-thirds are still clicking right up in appreciation, some of them to amazing degrees. Those markets have a great local economy, a great job market, young people moving in, new development, not too much of it, a great climate and different things that naturally drive real-estate markets, but it’s always local.
How does someone know when to sell?
It depends on what your own personal goal is. My whole goal in real estate is to try to buy properties in up-and-coming areas. I like to see the beginning of a turnaround.
For me, [the time to sell is] when that area has appreciated. It’s at that point where a house is being coveted in a neighborhood that everyone wants. I’ll know that my little investment is worth much more than I paid for it, and that for me is a time that I tend to sell.
As a homeowner, what do you think people can do in their current homes to improve the value of their property?
I believe the smartest thing to do to improve the value of your home is to do something that you’re going to enjoy, but to do it with prudence. By prudence I mean go out and shop the new home market to see what’s happening out there. Because I live in New York City, I’m a constant renovator. I want to enjoy my day-to-day living. I want to feel like I have a nest that I can’t wait to get home to. That’s what makes me spend money on my location. Before you please yourself, go off and shop the market, and see what’s out there that’s modern and attractive to buyers, so that as you spend the money you get the double advantage of thinking you’re smart at the same time.
For those who are new to real estate—what are some of the better resources out there? How should they educate themselves?
Don’t do a lot of research on the internet. Not that I don’t take full advantage of everything online, I can’t imagine life without the internet, but I find too much information causes [indecision]. I think the most important thing you can do is use the internet to get a bird’s-eye view of what’s selling for what [amount]. You can use the internet to keep abreast of what’s coming in and what’s new in the market, but I think there’s no replacement for getting up and going out to visit open houses. Every community in America has open houses. It’s good to broaden your horizon, and shop neighborhoods other than your own. Also, trust your heart. If you’re attracted to something emotionally, and it turns you on, for whatever reason, as a fixer-upper and you know what you can do with it, then you’re in love with that vision. Or, whether it’s the actual property exactly as it is, pay a little more to get that house, because when times go bad, it’s the pretty houses that will sell first.
What are your top three tips for entrepreneurs?
Don’t expect to find courage somehow through reading. I mean, people find different ways, but I find that in business, you find the courage on the way down, when you jump off the cliff.
Don’t worry about what you don’t do well, but find someone who does it well. Don’t be afraid of partnerships. There’s something wonderful about winning with a partner, and sharing the joy. There’s also something wonderful about failing and crying together. It’s hard to take a hit by yourself and be the only person in charge. Then, it’s your problem.
Lastly, the key to making money is hiring the right people. So, look for great people with potential talent. I’ve never hired anyone based on their resume or what they were doing before I found them. I found that it misled me. I always hired people based on what my gut reaction was, or what they could be good at. Once you tap into that in people, you own them for life. They’re loyal to you. You’ll take over, simply because you have the strongest people on your team. It’s all in the people, it has nothing to do with the business.
What is the belief you personally go to during times of change?
That even though you’ve exhausted all 10 of your ideas, and you’ve tried everything, that’s exactly when the answer is around the corner.
The best thing about change is…
…it spreads the wealth. When you make a change for change’s sake, you get some gold out of it.
What is the best change you have ever made?
I’d probably have a better answer to the hardest change. The hardest change in my life to date has been selling my business, and going from being a public, powerful personality to being a nobody, thinking I would be okay with it.
For more information on Barbara Corcoran, visit www.barbaracorcoran.com.
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