Cardone Capital and your thoughts?

41 Replies

Hi I'm currently looking to invest with Cardone Capital and I'm wondering if anyone here has ever invested with him or any other similar syndicators.  My ultimate goal is to build up my passive income to replace my job income, and when he (Also Origin Investments) talks about the stability of investing into large multifamily funds rather than individual deals, it makes sense.   

There are also a few others I've looked into such as Rod Khleiff's, Sunrise Capital Investors (Mobil Home Parks), Origin Investments, and Western Wealth Capital.  You are required to be an accredited investor with all of these vehicles. 

Thanks for everyone's insight 

Hey Ernesto,

His terms are 6% preferred annualy. Anything after 6% including the sale/appreciation of the property is split 65 Investors 35 Cardone Capital. I believe he averages a current return of 11-13% on his funds and shoots for 20-30% IRR over the course of 10 years.

He also charges a 1% management fee annually, 1% disposition and 1% acquisition fee. 

@Michael Wang I think discussing the actual terms of syndication might be a violation of SEC rules. Review Section 506 d rulings prior to discussion. 

I believe you can ask others for general feedback on the partnership and its structure. However such items as returns may not be discussed in public forums.  

Happy to provide to feedback on my experiences offline. 

Best!

Yes his min investment currently is 100k which I am looking to do just to try out his product.  He did mention there is another vehicle coming out soon that would allow non accredited investors to invest but no details are out yet.

@Caleb Heimsoth i think he is targeting low ca prate properties. 

I'm not sure so don't count on it, last I heard him talk on a podcast he mentioned Orlando and Houston. cant offer high returns if you buy at 6%cap or less.

@Michael Wang He has been working hard on his podcasts to sell the investment. He is using the podcast as a platform to recruit and groom buyers. I would just suggest you do extra due diligence, because he could sell ice to an Eskimo - as the saying goes.

@Michael Wang CC is coming out with a reg A plus offering that accepts non accredited investors. But I suspect due to the high amount of marketing and draw of unsophisticated investors their returns will be much less than what you ca. Get directly. Let me know if you have any more questions. I think the fact that you are on BP shows that you can take a bit more initiative than the average guy and should be able to find a less glossy operator.

Hey Michael. Investing in syndications (done properly) is similar to other types of investing in that you should analyze so many offerings that you can establish set investment criteria (i.e. sponsor experience, alignment of goals, rapport, development/value add/stabilized property, required preferred return, required COC by year, required total return, asset class, debt structure/terms, asset location, etc.). Without criteria, most offering packages will look good...that's their job.

I love Cardone"s enthusiasm.   However people this is an obvious money grab.    Motivators motivate to get you to buy what they are selling.

Think Hedge funds.   The operators make BILLIONS the investors 5 years in are asking Wheres my Yacht MONEY?  Ask CA pension funds.

The real investment BIG SHOTS dont accept public money.   Rockerfellas,  Morgans, Rothchilds, Buffet, etc.

Grant Cardone is a sales person and be aware he gets a lot of institutional money at very low rate of return so he has no reason to compete with smaller syndicators and his returns are way lower than normal syndicators and also you want to have a direct relationship with your syndicators which you can not have with GC.

@Michael Wang I agree with the advice of many above. 
You say your goal is creating passive income through investing in a syndication. That can certainly be done, but you should diversify, if you can, in several syndications with different levels of risk for higher returns. Cardone is on the lower end, since most of his money comes from institutional money. There are also syndicators who don't charge all of those fees, but you have to do your homework, and it starts by what you're doing here, and local meetups, networking with like minded people.

For example, some crowdfunding sites offer higher returns. I have invested with a private Hard Money Lender, giving much higher returns, and shorter turn around (but higher risk)

Originally posted by @Michael Wang :

@Joe Splitrock What kinds of extra due diligence do you recommend I look at? 

I would seek out other syndicators and compare their track records. Years in business, average returns and terms of the deal. I would evaluate at least three options and take the emotion out of it. Cardone has a magnetic personality, so don't work with him just because you like him. No doubt he is a sales and marketing genius, but that doesn't automatically mean his investment is the most profitable. Although I am sure he will claim that.

I personally wouldn't invest with Grant Cardone.

He's just a marketing machine who's focus is selling his programs.

His syndicated deals are likely just like any other program he sells.

The whole "Guru" thing and buying into the hype just isn't for me.

Hi Michael, 

The 6% is actually 3% (minus 1% management fee annually, 1% disposition and 1% acquisition fee). 

So my opinion: $3,000 is so small when rehabbers (in your network) are searching for any kind of loan amount below 15% from hard money lenders. 

Plus you still own the property is something goes wrong (if you're in first position).

Invest in yourself and things you can control.

@Brenda Wright I generally agree that there are better investments out there and @Michael Wang should compare a bunch to each other to see which one presents him the best return for the lowest risk.

But I would disagree with a few things you posted.

"The 6% is actually 3% (minus 1% management fee annually, 1% disposition and 1% acquisition fee)" - that is only true if the property is bought and sold in the same year. And that also completely ignores the rest of the return you're looking for which is the price appreciation on the sale. Most passive investors are not just buying for the preferred return, rather they are looking for the complete IRR from the deal which is primarily driven by forced price appreciation and possibly loan paydown. Those rates of returns are usually 15-20% or possibly more.

Also, I could argue that a first position loan on a single-family rehab flip in a hot market can be extremely risky and likely more risky than passive equity in a blue collar apartment complex.

I personally invest in both selectively but I don't think it's fair to say one is patently a better investment than the other. Rather you should look at each investment offering's potential total returns and risks and compare them with each other investment offering.

Originally posted by @Brenda Wright :

Hi Michael, 

The 6% is actually 3% (minus 1% management fee annually, 1% disposition and 1% acquisition fee). 

So my opinion: $3,000 is so small when rehabbers (in your network) are searching for any kind of loan amount below 15% from hard money lenders. 

Plus you still own the property is something goes wrong (if you're in first position).

Invest in yourself and things you can control.

A short-term loan below 15% on a flip is not comparable or a better use of capital than a 15-20% IRR on a long-term syndication investment. Even if you assumed the same passive return for both options...15%...you would have to analyze and invest in numerous flips (say 15 or so) over the course of 7 years to get the same return as 1 longer term syndication investment. The work (and risk) involved is massively different.

Investing in short-term loans is for professional lenders, friends and family, and investors who are not aware of alternatives.

I think you can meet syndicators in person who do similar deals, and you can vet them out on your own, and get references from others (whom you would also meet personally) who have previously invested with the group. The returns will be better than what GC is offering, if you can find a good syndicator. There must be multi-family networking groups where you live, where you can start to make connections.

As for investing in a fund vs. a single property, there is the benefit of diversification. My concern is that with a fund, it is harder to keep track of the inflow and outflow of money. If I invested in a fund, every time I got paid, I'd wonder if I was receiving profits, or is this just a recent investor's money? It is much harder to turn a single property deal into a Ponzi scheme. You could achieve the same diversification by investing in multiple deals, with multiple sponsors.....maybe even in multiple markets with multiple investment objectives. For example, I am invested in several multi-family syndications, in two different states, three markets, with five different syndicators. Some of my deals are stable cash-flowing assets with a moderate upside, while at least one has a huge upside but is more risky because turning around a poorly performing property is a challenge. If I had put all that money into one fund, I would be relying on the ability (and integrity) of a single sponsorship group, and I would have no control over the future deals where they chose to put my money. I like being able to hand-pick every deal in which I choose to invest, and pass on the ones that don't excite me. 

@Michael Wang  My general thought on that Sponsor is that he's a marketing machine and those returns are a bit low. 

I suspect you would do OK with them but I know a couple of the names you mentioned at the top of this post personally and I know they are focused and will keep their eye on the ball.  Better returns too.  Also unlikely that you'd ever get GC on the phone for a personal discussion regarding how your investment is doing.

I also like @Paul B. 's advice to meet local Syndicators.  I invested in 13 deals across 5 syndicators before I sponsored a deal.  I saw first hand the differences between good and not-so-good sponsors/deals.  The big guys aren't always the best.

@Steeve Breton like your answer. 

Knowing what you know now, do you think you can tell which one is good before putting money in their deal? I go to syndication meetups mostly for study purpose. My general impression is that the deals usually make sense, but I don't feel the "click".