I fully realize Cardone is a very polarizing individual, and that’s an understatement. I do disagree with him on some things, I’m not out to build an empire and we will probably always own our own home for various reasons. I do understand though the reasoning behind why he says you should scale up as quickly as possible to mitagate a lot of the costs with sheer volume. I also have my concerns with going from zero to literally 100, or frankly even 25. I have zero experience at this point and so stepping in and using investors dollars at that’s scale seems quite risky, and almost frankly misleading. I wouldnt be intentionally misleading them, but giving them confidence I can pull o off something I don’t have the strong experience in. Am I just scared and Cardone is right, or is caution better?
For some back ground I am located just north of Houston, have financing for the 300k mark working a JV deal. My goal is to start in 2-4 units to get my feet on the ground, and then hopefully jump into the 6-25 range and go from there.
Why not team up with someone with experience then who can help you along the way? It would also allow you to go bigger.
@Anthony Gayden I totally agree with you.
@Daniel J. I mean this in the most genuine way......Who cares if you are new to the RE industry. Its all about collaboration with the right people. Besides, the people that are joining forces and closing larger deals are the ones that are winning.
Having experienced partners will give you more leverage and you will get educated from experienced investors throughout the journey instead of going into it small and solo and possibly making your own mistakes.
This is just extreme ends of a scale, from doing no deals and just watching your whole life to doing thousands of highly leveraged deals. I have a running joke - "Who's Grant Cardone?" but when I say that what I really mean is "Who cares what Grant Cardone thinks?". You're not Grant Cardone, so you don't need to structure your philosophy around what Grant Cardone thinks.
Cardone is good for illustrating possibilities. But not all possibilities have to be reality. It is technically possible for me to become an astronaut, but I'm pretty happy just sitting on the front porch drinking lemonade (or a beer, if you don't like lemonade). You can go do 10,000 highly leveraged deals, if that's what you want to do. Or you can just try doing *a deal* and seeing how that suits you. Some people find they love this. Some people love just chasing the deal. Some people (like me) just like strong cash flow and are satisfied with less units to deal with.
So I would say don't worry about Grant Cardone, get 1 deal under your belt, and see how you feel.
Grant Cardone is crazy and it sounds like you have fear holding you back. Get into the game with a 2-4 unit if that is what it takes and then grow from there. Don't allow fear to paralyze you!
@JD Martin Thanks! That is my overall feeling, and feels more realistic, but I wanted a sanity check from experienced people.
@Todd Dexheimer Thanks! I call it being cautious haha! I must admit the idea of a 5 year ballon in a market where people are concerned about what is going to happen is a bit scary.
Not everyone likes cake, and not everyone invests the same way. It works for Grant and he is more than happy to preach it and motivate with it. If it's not your desire to 10x it, then don't, you don't have to. Do what your comfortable with.
I rather like your idea of running a unit or two before buying into 100+...
Granted, you may be farming out management when scaled up, but the insights you gain from managing a couple of units could help you oversee management and have some insights in the ownership process (such as CAP EX, Tenant Quality, Turn Around Procedures, Policies, etc).
You may even get granular insights on flooring types, plumbing fixtures, security deposits, etc. Some of these you would have to only read about if you went straight into 100 units. And I am not sure you would know when your managers or contractors were using the best practice or product in a given situation. You would have to trust (alot)....
Moreover, you may find you don't like the real estate space or class of investment altogether. In that case, selling a duplex may be an easier process than exiting out of a 100 unit with other owners (sounds messy but never tried)...
You could use the small scale to see what the process is like. Dip a toes in the water. You can always jump in the pool later--it is not going anywhere soon that I am aware of.
And in the meantime maybe balance the podcast philosophies. For example, temper those in favor of large scale and high leverage with the more conservative and financial foundation based podcast like Dave Ramsey (anti-debt and likes real estate only when paid for!). Maybe the answer for you is some place in the middle (like a fourplex with 25%+ down).... To each his/her own...
Best of luck!
Ok, the logic itself is sound. The method will differ from person to person. Getting multiple properties does hedge your bets. On my first property, it was a house that cash flowed $70/month. This was great until a $4k AC unit repair 4 months in. That wiped out cash flow for years. It was 2.5 years before I could get my second house. 10 years later, I'm at 42 units and no single property is a potential windfall of expenses anymore. It's a nice place to be in, but it took me a while to get there. Others may can do it in a year, others it will take longer.
@Daniel J. GC is a business man first!!!! He get's people pumped up and ready to take the leap into large scale multi's. He has very good points about jumping into larger apartment space. That is where I am heading in my business. However I think that there is still great experience you will gain from doing smaller deals.
P.S. Partners are important whether money partners, credit partners, boots on the ground, attorney, insurance Co etc.....However vet, vet, vet the people you are looking to work with and mitigate your risk. All the best to you!!!
Originally posted by @Daniel J. :
@Anthony Gayden @Alisha Decoteau That is certainly not a bad idea, I know of those who have done that. What do I bring to the table though? Why would an experienced investor want to spend their time on me?
You can bring the deal! Find a great deal and get it under contract, then find an experienced partner or two to help move it from there. You can also bring money, not only yours but also using your sphere of influence to fund a syndication. Remember, 20% of something is better than 100% of nothing. Good luck!
@Daniel J. - I was wondering the same thing about Cardone as I listened to his podcast. One thing that stuck out is how he spoke about what he 'should' have done when he was younger. Hind sight is always 20/20 and he is forgetting about his own development and things he learned along the way to make it all possible. Im sure if he took such a big leap without having all of his experience, it may not have panned out as well as he thinks it would have. I hope that his advice does not push somebody that is too inexperienced into a nightmare 4%CAP that they lose their butt on.
I always think of a quote from the late, great Jim Rohn "Make sure what you do is a product of your own conclusion". Simple but imperative.
I'll just googled GC and this is what came up under grantcardone.com:
" Grant Cardone is a New York Times bestselling author, international speaker, business innovator, social media personality and top sales trainer in the world."
"Real estate investor" doesn't appear on this list. That's not to say he doesn't invest of course, but his main focus may be selling those books, etc.
Yes, you need to keep expanding your thought processes and vision. And yes, you'll occasionally have to stretch past your comfort zone. But if you are like most of us, getting into those first few properties will be enough of a stretch for now!
He is a little crazy but that doesn’t mean he’s wrong. The great thing about real estate is there are a lot of ways to be successful.
I like Grant’s stuff but I still personally think househacking is one of the best ways to get started.
@Julie Marquez That is very true, thanks!
@Michael Boyer That has been what my thoughts have been! While I may get that large at some point, i'm not really sure what my end point will be. I am ultimately looking for a lifestyle business, not trying to get to be a billionaire.
@Justin B. The scaling is why I am pursuing MFH, I realize the more you have theoretically the easier it is to cover random expenses, but its a bigger fail too if something goes wrong.
@Shawn Ackerman Thanks!
@Jordan Moorhead That is very true. That is unfortunately not in my list of options anymore.
@Daniel J. then it wasn’t a good deal and you should be glad to be able to walk away during the diligence period. Seriously, if you have a good deal and drop it in an experienced syndicators lap and they get a nice percentage of a good deal without lifting a finger to find it, who is going to say no to that?
Grant's mindset is incredible. In order for him to grow the portfolio he has today... he mastered his sales experience which increased his income and eventually got into multifamily... He talks about his first investment being a duplex and moving from there.
Only you can make the right choice for yourself and situation.
House hacking is a great way to get started!
I seriously doubt that Grand Cardone "owns" anything, let alone $600 million worth of real estate, BP. It's all leveraged. If the market tanks, so might he and all his investors! That would be a risk I would never be willing to take.
Trying to build a business that would sustain your family so that you can quit the 9-5 is not a get-rich-quick scheme. Get your own finances under control first and then begin to purchase real estate. The lessons you learn as you do that will be priceless to you.
I, like you Daniel, am not out to build an empire. I don't have the energy to build it or sustain it even if someone else manages it. You still have to manage the manager. I like owning my own house too. It's mine to make my own HOME. You've heard the saying "There's no place like home", right?? So true!
Yes, you definitely mitigate costs the more houses that you own, no escaping that fact.
For some people, caution is better. You have to know your own risk tolerance. It's not the same as anyone else's and certainly not someone like Grant Cardone.
Wish you the best as you get started!!
@Camilla Sauder So lets say Grant Cardone does not "own" any real estate because it is all leveraged. If you understand real estate that is exactly the point the L in IDEAl is probably the most important part in owning real estate. Owning real estate free and clear is one of the worst financial decisions an investor can make. Ok so I guess I do not own any real estate either since I have mortgages on all my properties funny how I was able to retire from my day job and still receive income from something I do not "own".
And if we were going to use your philosophy of saying someone does not own a piece of real estate because they have a mortgage on it, I would like you to try something out. Go and pay off your mortgage tomorrow and stop paying your property taxes and sit back and wait. See how fast your city forecloses on you for non payment of taxes. But how could they do that if according to you, you "owned" it free and clear?
Remember Cardone started with $350,000 on his first deal. Not the single family deal that he did long before, but after he started his sales programs and was selling cars etc. he had saved a bunch of $$.
He also started in the 80’s, times have changed.
@Daniel J. I would go so far as to say Cardone is giving horrendous advice at times. His ideas of the stock market (and his claims that it's a foolish investment) completely contradict guys like Warren Buffet and Mark Cuban. The housing numbers he spouts out fail to acknowledge the tax incentives accompanied with home ownership (Grant often claims home ownership is for fools). He is an online personality and should be taken with a grain of salt and compared with information from other investors.
Not to take away from Grant's success because he's clearly attained great success, but his investing advice should be weighed with other successful investors. I highly recommend folks read Ray Dalio's book, Principles, or Howard Marks, The Most Important Thing. I would gladly see Grant debate either of those gentlemen on his investing principles.
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