Let me start off by saying that I am a big fan of a success guru by the name of Grant Cardone. According to our data, he is the second most popular guest by listen count of all time on the BiggerPockets Podcast (second to *cough *ahem *grunt yours truly!). A self-made millionaire by the age of 30, Grant Cardone embodies the hustle, entrepreneurial spirit, and winning attitude that so many of us on BiggerPockets have come to admire.
Grant Cardone is a proponent of “10X” thinking. He believes that we need to expand our thinking, increase our goals, and take the massive action needed to achieve them.
And he is damn right.
But too many followers get the wrong message when they hear Grant Cardone talk about massive action. Unable to fathom how they are going to achieve a million-dollar net worth in less than five years, they come up with plans like “buying real estate with no (and low) money down” or otherwise try to leverage their way to success with other people’s money.
They fail to see that Grant Cardone’s massive action did not come from leveraging other people’s money, but from building a rock-solid financial and personal foundation from which he was able to accumulate and then magnify his wealth.
The purpose of this post is to highlight the incredible hard work and self-development that Grant Cardone (and many successful people) put in prior to making a significant real estate investment. I intend to persuade those thinking that “massive action” is synonymous with “leveraging to the hilt to buy million-dollar pieces of real estate with other people’s money from a standing start with little to no experience, assets, or network” that they are wrong.
How to Purchase Real Estate With No (or Low) Money!
One of the biggest struggles that many new investors have is in coming up with the money to purchase their first real estate properties. Well, BiggerPockets can help with that too. The Book on Investing in Real Estate with No (and Low) Money Down can give you the tools you need to get started in real estate, even if you don’t have tons of cash lying around.
The Parable of the Pharaoh
There’s a great example used in MJ DeMarco’s The Millionaire Fastlane: Crack the Code to Wealth and Live Rich for a Lifetime. (a solid read if you haven’t picked it up yet). In this parable, a pharaoh instructs his two sons to build a pyramid and tells the two sons that upon completion, they will be rewarded with riches, kingship, and more. One son goes off to the races and starts laying bricks one by one, constructing first one layer, then another, then the next. His progress slows to a crawl as it becomes increasingly difficult to lug the heavy stones higher and higher as his pyramid rises.
The second son makes no visible progress on his pyramid for three years. Instead, he spends that time building a machine to do the work for him. While his brother laughs at his apparent lack of progress, one day he unleashes the machine. Within 40 days, he surpasses all the progress his brother had made in the preceding three years, and in just a few short years, he finishes his pyramid and enjoys a life of leisure, kingship, and success.
The first brother never finishes the pyramid.
Massive Action is as Much About the Effort as the Result
MJ DeMarco’s intent with this parable is to show how those in the “fastlane” focus on building a system to build wealth for themselves, while those in the “slowlane” use their efforts to trade time for money.
But I see this parable as being highly relevant to the discussion of the accumulation of wealth. The second brother in the parable was building a foundation from which he could explode toward massive wealth. He didn’t take off to the races without a long-term plan. He knew exactly what he was building and why.
Related: A Slow, Boring, Incredibly Awesome Strategy for Building Wealth Through Passive Real Estate Investing
And so did Cardone.
Grant Cardone did not become wealthy through real estate. He is a successful entrepreneur and businessman, and he started his career in sales. He devoted himself to self-improvement and became a best-in-class salesman. He built an enormous business and personal reputation. At 29 years old (he became a millionaire at 30), he bought a single family home as an investment, and it didn’t work out. He sold that property and didn’t re-enter real estate investing until five years later.
By that time, Grant Cardone was a multi-millionaire, and he brought $350,000 as a down payment on a $1.9M, 38-unit apartment complex in San Diego.
Massive Action vs. Stupid Action
I consider building a successful business to the point where I have so much cash that I can drop $350,000 on a $1.9M apartment complex as a “side business” to be “massive action.” Respect to Cardone.
However, I consider using other people’s money to leverage the down payment and buy that same property with less than $100K net worth, $0 down, and no outside successes or sources of income anywhere in that same ballpark to be “stupid action.” I hope that you do not confuse the two. This property was not going to make or break Grant Cardone’s career, but it can devastate the newbie. Grant Cardone had years, maybe a decade, of sales and business experience prior to his massive purchase. The newbie may have none, or they may have simply read a few books.
Don’t invest in a property when you have lower odds of success and more at stake than your competitors. That’s a fool’s game. Instead, lay your foundation first, and invest from a position of strength.
Laying the Foundation
Grant Cardone laid a foundation and built a system for producing wealth prior to buying enormous multi-unit apartment complexes. And I believe that this is the best approach for most of us out there who aspire to build personal wealth. I, while not an entrepreneur, am certainly a salesman, and have worked hard to lay my own foundation by saving hard, focusing on building my reputation and network, and doing what I can to self-educate and lay the foundation for a successful career.
I choose to crawl, then walk, and then run. You won’t see the multi-million dollar purchase until I am financially capable of doing so with ease—and with only a small proportion of my liquid net worth.
Can one become successful without this in place? Of course! Mark Zuckerberg and Bill Gates jumped out of the gate before even graduating college and built some of the world’s biggest companies. Closer to home, guys like Brian Adams built large syndications with little direct real estate experience (but a huge network and strong financial background). Still, I believe that it is important for me—and likely you as well—to focus on building that foundation prior to making large investments, especially with other people’s money.
Understand that pouring a foundation, even over a period of a decade, and saving and earning money is taking massive action. Remember, Cardone checked out of rehab for a drug addiction at the age of 25 and didn’t make that purchase until nine years later. Of course you can lay a $350,000 foundation in nine years! A dedicated saver and savvy businessman or salesperson can lay that foundation and create that kind of liquidity in five years or less.
That is massive action.
Building your first $25,000 in liquidity, parlaying that into your first $100,000, and exploiting that wealth to pursue opportunities to grow to your first $500,000, then $1,000,000, over the next 5-10 years? That is massive action.
But ignoring the core concepts of wealth creation, failing to invest in self-education, neglecting to save, declining to accumulate liquidity and build passive cash flow, and attempting to leverage to the hilt with hundreds or thousands of dollars of other people’s money? That’s stupid action.
You leave too much to chance and are too dependent on a highly leveraged investment working out. The stakes are too high, and your odds are too low.
We’re republishing this article to help out our newer readers.
What kind of action are you going to take?
Leave your comments—agreements, disagreements, or questions—below, and let’s talk!