In the United States, the median household income sits around $57,617 a year — hardly a livable salary, let alone a wealth-inducing one. Experienced investors and members of The Oracles share their top investment secrets to help you multiply your money.
The Oracles
1. Buy real estate in up-and-coming neighborhoods.
Turn a loan into a real estate fortune by investing in budding real estate markets. My secret for identifying up-and-coming areas is simple. I ask every young person who’s just moved to the city, “Where are you living?” Inevitably, they mention a neighborhood I’ve never heard of. I then ask if a lot of other young kids are moving into that area. If so, I know the property values in that area will rise as its residents’ earning power increases.
I took a $1,000 loan and turned it into a $6 billion real estate business by putting my money into, what were at the time, up-and-coming areas in New York like Park Slope, Red Hook, the South Bronx and Washington Heights. As these neighborhoods became more sought after, the property appreciated by 20 percent every year.
Once you own real estate and rents go up, it’s stupid to sell. Never sell your real estate; just use it as a piggy bank. —Barbara Corcoran, founder of The Corcoran Group and Shark on “Shark Tank”
2. Know your ‘why’ before investing.
Real wealth isn’t about money or stock portfolios. Real wealth comes when you discover the gifts God has given you and use them to help others. To achieve lifelong wealth, find your “why” and use it to share your gifts. Your “why” should be something that deeply motivates you and is connected to your overall life purpose.
If your “why” leads you to invest in or launch a business, planning is key, and working in your area of passion is critical. When researching, look at all the information that’s available to support your venture. Also, have a clear sense of your end goal and an exit strategy.
The need for entrepreneurs to fully understand their journey, from start to finish, has shaped the purpose of my business. We give you all the tools you need to take your business from inception to reality in a box, aka your “deal in a box.”
Ultimately, if you can’t measure it, you can’t manage it. Set success metrics that fit the projects you are working on. Also, empowering your people is paramount. If you are clear on your “why” and empower others, real wealth will follow. —Thomas Carter, founder and CEO of DealBox Inc; connect with Thomas on LinkedIn
3. Rent out residential real estate.
Invest in residential real estate that you can rent out. Surviving the tough times is just as important as riding out the good times. But everyone must live somewhere — regardless of the economy. Single-family homes, condos, townhomes and two-flats are especially easy to rent, sell and finance. They also maintain their value in the event of a downturn.
Overall, a one-off residential property can offer more flexibility than other types of real estate. If you lose a tenant in your strip mall, the value of the mall goes down. A residence can hold its value, rented or not.
When investing in residential properties, ensure that any purchase you make produces both acceptable cash flow and can appreciate over time. The smart investor never just relies on one or the other. —Ken Lebovic, president of North Shore Holdings; built a real estate empire acquiring thousands of properties in 20 years
4. Time the market.
To optimize your capital gains, timing is everything. Investors often use a metaphorical clock for this purpose, where 12 p.m. and 6 p.m. represent the peak and bottom of the market, respectively. Everyone is buying during a “boom” phase, and it's easier to get a better deal when everyone is selling at the bottom of the cycle.
Here's the challenge: No one has a crystal ball and unequivocally knows when the market is at precisely 6 p.m. So, the next best time to buy is 7 p.m. — when the market is slowly moving up. I’ve been examining market cycle trends for 25 years. Your trend is your friend: Once you discover a trend that works for you, use it. —John Hanna, author of “Way of the Wealthy“ and CEO of Fairchild Group
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5. Make your money on the buy.
With real estate, investors often believe that flipping a “fixer-upper” is where the money is. False. Your purchase price is the main factor that determines your profit later on. Simply put, you make your money when you buy, not when you sell.
To buy right, determine the potential value of a property by researching three comparable sales, or “comps.” Use comps with a similar size, value and location to more accurately assess value.
When buying a rehab property, first ask yourself two questions. One: What is a realistic sales or rental price for the property, after all the necessary repairs are complete? Two: What is the total scope of work needed to attain that value? Don't allow your personal preferences to cloud your judgment about repairs.
The devil is in the details, but so are the dollars. Start with your best price in mind, back out your repairs and costs, and don’t ever forget that you make your money on the buy. —Mark Bloom, President at NetWorth Realty, ranked by Glassdoor among the “Best Places to Work” for two consecutive years
6. Do your homework, then follow your gut.
Whether you're investing in stocks, companies or real estate, do your homework by using all the data and analytics you can find. Then, listen to your gut. Rely on the data and your instincts, not just your financial advisors.
The best deals I've made were informed by my intuition. The worst were when I ignored it. For example, years ago, my IT person suggested I invest in Netflix. Later, I asked two of the smartest people I knew if I should, and they both said, “No.”
My gut said to do it, and the data said to do it, but I didn’t. The stock, of course, shot up and became a huge success. Shortly thereafter, I was listening to a famous entrepreneur and investor speak. When asked, “If there was one stock someone should buy, what would it be?”, he replied, “Netflix.” The stock was pretty high at the time, but my gut still said, “Go.” This time, I wasn’t going to ignore my intuition. I called my advisor and said, “Buy.” She asked, “Are you sure?” and I said, “Yes.” Glad I listened to that entrepreneur and my gut. —Peter Hernandez, president of brokerage (California) at Douglas Elliman; founder of Teles Properties
7. Apply the Kaizen principle to your cash flow.
“Kaizen” is a Japanese word that means the process of continual improvement. Apply this principle to your cash flow by increasing your income by a minimum of three percent each month. For example, suppose you’re currently earning $3,000 per month. Incrementally raise your monthly base as follows:
- Month 1: $3,000 × 3% = $90
- Month 2: $3,090 × 3% = $92.70
- Month 3: $3,182.70 × 3% = $95.48
After 24 months, you'll be making $5,920.77 (a 97% increase). Your previous month’s returns will drive next month’s earnings.
One way to increase your income is to build mobile apps for businesses. Mobile apps are to small businesses what a website was in 2000: They’re a game-changing sales tool.
Outsource the app-building to a team of freelancers, and focus your efforts on selling via social media promotion. You could charge business owners an upfront fee of $997 and apply a recurring $97 per month maintenance fee while delegating out all the tech work. —Nik Halik, angel investor, entrepreneur, astronaut, extreme adventurer, founder, and CEO of 5 Day Weekend®; follow Nik on Facebook
EDITOR'S NOTE: Investing of any type involves risk and therefore there is potential for losing money. Before investing, seek advice from a professional financial advisor.
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