Grant Cardone Just Warned Investors of a Market Correction: Here’s How to Protect Yourself
“WARNING WARNING WARNING. You know how pro real estate I am. But recently I started warning you – “beware when cranes are in the air.” If New York real estate fails it will affect the entire country. This is NOT the time to buy, unless you steal.” — Grant Cardone
Are we facing a correction in the real estate world soon?
I recently took a trip to the amazing city of Miami, Florida. I saw at least 20 cranes up in the air, which is by far the most I have seen in a while. It got me thinking if there is any truth to what some of the pessimists have been saying about another real estate market correction. So is it coming soon? Does it matter? If so, what are the smart financial moves to make now?s
I am incredibly bullish on real estate, as are many other savvy and experienced investors and firms all over the world. In fact, surveys of sophisticated global investors revealed by Forbes show that over 90 percent plan to expand their portfolios in America in 2016.
Yet the indicators of a boom and questions of a coming correction aren’t just floating around Miami. It is Orlando, New York City, and throughout California, too. Even in my area of Indiana, they are building more and more.
When Does a Recovery or Boom Turn Into a Flop?
Looking back at the lessons of the past, it has been oversupply, speculative buying, lack of affordability, and lack of sustainable investment that have really deflated the market.
The Financial Times, as well as several news outlets in South Florida, have noted that there has been a boom in inventory and a resulting cooling in sales and prices in some Miami and NYC market sectors. FMA Data reports that even in Orlando, it now takes almost double the average local income to afford the average housing.
There are reasons that a lot of this growth is supported, such as global investment in the United States, fear of the stock market, and higher rents, thanks to Airbnb. The big question is — is it sustainable?
If history has taught us one thing, it is that there will probably be another fluctuation in property prices. That may be in one year or seven. Savvy investors know this, yet are still buying. What they realize is that over the long run, real estate always goes up. It may dip and go sideways, but that makes little difference to those with a long-term hold game plan.
Choosing Sustainable Investments
Still, to win and to ensure your financial needs are provided for in the short and long term, investors need to be smart when buying. Warren Buffett would say never to buy based on speculative values anyway, but to buy based on production. If a property can continue to throw off positive cash flow, then it really doesn’t matter what others speculate it is worth this year or next.
So for me, I am looking for investments that are cash cows, but also that are least likely to see the major price fluctuations of properties in Miami or New York City. I am looking for sustainable investments that will remain profitable and retain the most flexibility.
I am 100 percent pro real estate. But it would be irresponsible to wildly claim that there are no clouds on the horizon, when the cranes are casting very visible shadows on the market. I want others to enjoy the much needed benefits of investing in real estate but avoid the pain millions are still recovering from by investing diligently and wisely today.
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With just under a decade of experience in the real estate industry, Sterling currently manages over $10MM in capital, which is deployed across a $26MM real estate portfolio made up of multifamily apartments and single-family homes. Through the company he co-founded, Holdfolio, he owns just under 400 units. Sterling was featured on the BiggerPockets Podcast and has been contributing content to BiggerPockets since 2014, with over 200 posts on topics ranging from single-family investing and apartment investing to wholesaling and scaling a business.