Grant Cardone Predicts Average US Rent Will Almost Double Over the Next Decade — And He Thinks It’s a Golden Opportunity
Real estate investor Grant Cardone is known for his bold predictions and unyielding confidence in the housing market. Recently, he made headlines by forecasting that average rents in the United States will nearly double over the next decade. With a staggering $1 billion bet on this thesis, Cardone is positioning himself to capitalize on what he believes is a unique opportunity in the real estate sector. Let’s delve deeper into Cardone’s predictions and the rationale behind them.
The Current Housing Landscape
In a recent interview on VladTV, Cardone highlighted the current state of the housing market, particularly the impact of high mortgage rates. As of June 2024, the average 20-year fixed mortgage rate stands at 6.99%, the highest it has been since 2001. This spike in borrowing costs has created a significant barrier for potential homebuyers, making homeownership much more expensive compared to renting. According to Realtor.com’s February 2024 Rental Report, renting is now cheaper in all 50 states, with a staggering 60% price difference in favor of renting in many of the country’s largest metropolitan areas.
Cardone argues that this disparity between ownership and rental costs is unprecedented in his lifetime. He believes that if mortgage rates remain high, rents will inevitably rise to meet the demand. “If mortgage rates don’t come down, rent has to go up,” he asserts, predicting that the average rent, currently at $1,800, could soar to nearly $3,000 by 2034.
The Implications of Rising Rents
The implications of rising rents extend beyond just tenants; they also significantly affect property valuations. Cardone anticipates that as rents increase, so too will the value of his real estate portfolio, potentially doubling its worth. He envisions providing an 8% to 10% cash flow to investors and a 2X to 3X return on capital investment. This optimistic outlook is rooted in his strategic focus on large multifamily properties, particularly those with distressed debt.
A Unique Opportunity in Multifamily Properties
Cardone sees a golden opportunity in the multifamily real estate market, particularly among properties owned by large institutional investors. He claims to have recently acquired properties at prices “40% to 50% below replacement value,” emphasizing that this segment of the market represents the “best, biggest, most massive opportunity of my 66 years of existence.”
The multifamily real estate sector is currently facing a wave of distress, with commercial real estate loans becoming increasingly expensive. According to property data firm CRED iQ, the distress rate in the multifamily industry reached a record high of 8.34% in April 2024. Cardone believes that many institutional investors, who entered the market during the pandemic when interest rates were at historic lows, are now compelled to offload their assets due to cash flow issues and impending redemptions.
A Collective Bet on Distressed Assets
Cardone isn’t alone in his assessment of the multifamily market. Prominent figures in the investment world, such as Barry Sternlicht of Starwood Capital Group and Tim Sloan of Fortress Investment Group, have also identified distressed multifamily deals as attractive targets for investment in 2024. This collective sentiment underscores the potential for significant returns in a market that is currently experiencing turmoil.
Conclusion: A Cautious Yet Optimistic Outlook
While Grant Cardone’s predictions may seem ambitious, they are grounded in a thorough analysis of the current housing market dynamics. The combination of high mortgage rates, rising rents, and distressed multifamily properties creates a unique landscape for savvy investors. As Cardone prepares to deploy nearly $1 billion into this asset class, the real estate community will be watching closely to see if his bold predictions come to fruition.
In a time of uncertainty, Cardone’s confidence serves as a reminder that opportunity often lies within challenges. Whether or not his forecasts materialize, his approach highlights the importance of strategic thinking and adaptability in the ever-evolving real estate market. As we look ahead, it will be fascinating to see how these trends unfold and what they mean for renters, homeowners, and investors alike.