I loved his podcast. I bought his 10x audio book and just started listening to his Cardone Zone podcasts.
Wow. His real estate advice is....almost horrible. If he really analyzes deals this way then he HAS to put 25% down to have them cash flow. It's buying cash flow vs creating cash flow.
Not knocking the guy because he obviously is crushing all of us but I was disappointed in what I heard. I'll still listen to his other shows but I'll likely cringe through the real estate ones.
If he had learned to buy more creatively he'd already have a billion in real estate assets.
Initially I felt the same way Brandon. I think Grant's main value, for me personally, is his attitude and paradigm about problems and life in general. Some parts of his podcast I cringed through because I think it would be safe to say we not only didn't see eye to eye but were polar opposites. That's ok though, who wants a world full of clones? Overall I'd say I really like him though.
Not to sound sycophantic but I think deciding to supplement the podcasts by introducing different content such as mindsets along with advanced theory is spot on. I'd agree that guests like Grant fit very nicely into that.
The great part about real estate is there are so many right ways to do it. I think all someone can do is share their story of how they did it along with their preferences as to why they did it that way. I think if we are going to analyze the efficacy of something, in this case the process Grant acquired the real estate, then it's fair to see what that individual's goals or restrictions are.
To be fair I have not read his book but I think human behavior dictates that once you reach a certain level of comfort with a task, efficiency takes a back seat to other concerns such as convenience or other issues. In this case plopping down the 25% he has instead of spending a great deal more time doing things creatively. Grant strikes me as the "Here's X dollars, let's do this" kind of guy instead of the "Hi there, let's make a deal" kind of guy.
Ben Leybovich made a similar argument to yours in an article he wrote. I agree with the two of you and this makes sense from our prospective but if you, Ben or myself were in Grant's shoes would it still make sense? I think I would be doing something similar to what Grant is doing. While I'm confident that yield is important to Grant, I'd imagine what to do with his money is a larger issue and as such supersede other concerns.
@Brandon Hicks - it's a little more complicated than this. Let me explain:
RE to Grant Cardon is not a business - it is a place to store and grow wealth that he generates elsewhere. He says he wants to learn NMD, which means that he would have to change his perspective, but thus far he has done very well buying Cash Flow.
The thing is - he generates $2 mil. of cash flow in his business, which is highly taxed because it's earned income. So, Grant's priority is to convert the face value of that lump sum into passive, and the best way to do that is RE.
Furthermore, there is the concept of time-value of money. So - now that this cash is sitting in his bank, what can be done to have it invested for the most after-tax ROI. Projecting this thinking 3,4,5 years ahead lands us at the door of the mathematical concept of Net Present Value (NPV). Which answers the following question for Grant:
If I were to dump $2 mil. into a piece of real estate, and receive a set of cash flows over a set period of time in exchange, would I end up better off after-tax than putting this $2 mil. into something else adjusted for opportunity cost and inflation...?
Something like this :)
Now - to frame this question, Grant must use what's called a "Discount Rate", which is essentially the opportunity cost. As in - I can get 8% by re-investing in my company; will making a down-payment on RE be net positive, break even, or net-negative relative to this discount rate of 8%...?
Thus, for someone like Grant, the best thing may very well be to dump the money into RE, even if that means buying CF. The point of my article, and what I said on his show, was not that he is wrong about the way he is doing it - if I could do it that way, I would. My point was - if you can't do that, is the best thing to do nothing, or is doing NMD better? My answer is that even though NMD is definitely a hustle, it's better than nothing! And where he is wrong is to suggest otherwise, which is what I called him out on :)
After all, there are grave costs to doing nothing. And we, NMD guys, because we have so much more cost associated with doing business in RE, have to pick deals with arguably better margins than Grant Cardone...
I am thinking of writing an article on this. If there's an interest, I might do that. Hope this helps :)
I think my thoughts are pretty much aligned in the same manner on him.
I get all that and I guess I agree that I would dive in a bit more with less of a regard for "safety" if I was merely parking money.
My initial problem with his advice was that it could be somewhat reckless when applied by a listener with no real experience. However, I also see that doing nothing can yield the same end result. Broke is broke.
Now that I've had more time to think it through (and listen to a few more of shows) his (inexperienced) listeners have some insurance from getting into a bad deal where you and I have to rely on ourselves properly evaluating a deal. Since he is recommending people come up with the DP and go with bank financing, they have the bank looking out for their capital and therefore somewhat protecting the buyer from making a horrible investment.
I'll listen to your episode soon :)
@Brandon Hicks - except that while you buy C Class stuff that the owner wants to finance to you cause they can't get what they want otherwise, Cardone buys assets that are about as safe to appreciate as anything, which drives his IRR though the roof...
We all do what we must :)
Very true :)
And I like to think I turn my "C's" in to C+/B-'s :)
What I find is commercial clients with various levels of wealth view things differently.
Someone with 400k is at a different place than someone with 40 million.
If you live comfortably off of 100k a year and are sitting on millions you do not want risk you want safety.
So if you can buy a property 25% down that throws off 15% coc on your money annually then you do not care about riskier type properties where you get 3,4,5 percent more etc.
You have already made it and now want to protect your wealth.
There are others ways to increase wealth than grinding out a value add. If you simply buy an asset class at the bottom of the cycle and let rents increases and the cap compress then 1031 off into the next opportunity (ies).
I have seen clients make millions off of cap compression on fully performing properties when they bought them.
All kinds of ways to do things out there.
I am late to the game having just listened to the podcast featuring Grant Cardone for the first time today. I honestly have to say that I agree with much of his style of real estate investing. There are strong reasons why I could see going this route even as a beginning investor.
I do not own my own business, but work in a position that puts my income at the level of the upper middle class. Many people in my position max out their 401K contributions, max out their Roth IRA, and have large savings and a brokerage account as well. Up until a year and a half ago I followed that basic plan and hoped to retire with a nice "nest egg".
When my eyes were opened to real estate investing I was searching for a higher yielding and safer vehicle to hold my money than the stock market, a 401K, a bank account, etc. Not only that but I strongly desired a much greater level of control.
Also I am not looking for another job. I knew from the beginning that I did not want to be a landlord. I also did not want to become a general contractor. I wanted to invest plain and simple.
I will say though that while I do not have any desire to use partners, I am willing to use creative financing solutions to expand my holdings. Just as an example right now I am under contract on an owner financed deal. Also in the future I am considering drawing equity out of the properties I already own in order to fund the purchase of more properties. I also believe strongly in buying at a discount and adding value.
I hope that other people aren't offended by those of us who see real estate as a way to create and maintain wealth over the long term, and not necessarily as a way to completely replace their job.
I will mention that if nothing else Grant Cardone is right about one thing. We often are limited by our own thinking. I just bought his book on Amazon today, but I really like the general concept of the book. My goal had been to have a million dollars in net worth through real estate. Now I am changing that goal to having ten million dollars in net worth in real estate. It is a much harder goal to achieve, but it requires a level of thinking far above the million dollar level. Instead of thinking about owning 4-plexes, now I am thinking about owning 100+ unit complexes. I am thinking about what I would need to do to get to that level, and I am making adjustments in my plans to help me get there.
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