The Worst Investment People Can Make: Grant Cardone’s Take on Homeownership

Homeownership has long been heralded as a cornerstone of the American dream. It symbolizes independence, financial security, and prosperity. However, real estate investment guru Grant Cardone challenges this traditional notion, arguing that the pursuit of homeownership may not be the best financial decision for many Americans. Instead, he advocates for alternative investment strategies that could yield better returns.

The Case Against Homeownership

In a recent Instagram post, Cardone boldly declared, “Buying a home without a doubt is the worst investment people can make, yet it’s also the most common one.” His argument is rooted in the financial burdens that accompany homeownership, which often go unnoticed by prospective buyers.

To illustrate his point, Cardone presented a hypothetical scenario involving a $576,000 home purchased and held for ten years. Over that decade, he outlined several costs that homeowners typically incur:

• Broker Fees: 12% of the home’s value, totaling $69,120.
• Maintenance Fees: 10% of the home’s value, amounting to $57,600.
• Property Taxes: 20% of the home’s value, which equals $115,200.
• Mortgage Payments: 70% of the home’s value, resulting in $403,200.

When these expenses are added to the original price of the home, the total cost balloons to an astonishing $1,221,120. Cardone emphasizes that in order to break even, the home would need to be sold for around $1.2 million—a figure he believes is unrealistic for most homeowners. He refers to these costs as “dead money,” highlighting how they can lock individuals into a financial commitment with little to no return on investment.

Alternative Investment Strategies

So, if homeownership is not the ideal path, what does Cardone suggest instead? He advocates for investing in residential real estate, particularly through methods that allow for greater flexibility and potential returns.

1. Crowdfunding Platforms

One of Cardone’s primary recommendations is to explore crowdfunding platforms that enable everyday investors to pool their resources to purchase properties or shares of properties. This approach democratizes real estate investment, allowing individuals to participate in the market without the burdens of traditional homeownership.

2. Necessity-Based Commercial Real Estate

Cardone also highlights the resilience of necessity-based commercial real estate, which includes properties that provide essential services, such as grocery stores and pharmacies. These types of investments tend to perform well even during economic downturns. Platforms like First National Realty Partners make it easier for accredited investors to access these lucrative opportunities, allowing them to invest in grocery-anchored commercial real estate and share in the profits generated by national brands.

3. Investing in Rental Properties

For those interested in residential real estate without the headaches of property management, Cardone suggests platforms like Arrived. This platform allows investors to buy shares in rental homes and vacation properties, providing a way to benefit from real estate appreciation and rental income without the responsibilities of being a landlord. With Arrived, you can start investing in real estate with as little as $100.

4. Real Estate Investment Trusts (REITs)

Another option for those looking to invest in real estate is through Real Estate Investment Trusts (REITs). These are publicly traded companies that collect rent from tenants and distribute that income to shareholders in the form of dividends. DLP Capital offers a variety of funds focused on residential and multifamily real estate, with targeted annual returns of up to 13%. This option allows investors to gain exposure to real estate markets without the need for direct property ownership.

Conclusion

While homeownership has traditionally been viewed as a key component of the American dream, Grant Cardone’s perspective invites us to reconsider this notion. By highlighting the financial pitfalls of buying a home and presenting alternative investment strategies, he encourages individuals to explore more lucrative avenues in real estate. Whether through crowdfunding, necessity-based commercial real estate, rental properties, or REITs, there are numerous ways to invest in real estate that may yield better returns without the burdens of traditional homeownership.

As always, it’s essential to conduct thorough research and consider your financial situation before making any investment decisions. This article provides information only and should not be construed as financial advice.