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

Homeownership has long been heralded as a cornerstone of the American dream, symbolizing independence, financial security, and prosperity. However, this dream is increasingly being questioned, especially by those in the know about real estate investing. One of the most vocal critics of the traditional homeownership narrative is Grant Cardone, a prolific real estate investor and entrepreneur. Cardone argues that the pursuit of homeownership may not only be misguided but could also be one of the worst financial decisions many Americans make.

The Case Against Homeownership

In a bold statement made on Instagram, Cardone declared, “Buying a home without a doubt is the worst investment people can make, yet it’s also the most common one.” This assertion raises an important question: why do so many people still chase after the dream of owning a home? Cardone suggests that a lack of financial education may play a significant role, as many individuals are not fully aware of the long-term costs associated with homeownership.

To illustrate his point, Cardone provides a hypothetical scenario where an individual purchases a home for $576,000 and holds onto it for a decade. Over this period, the homeowner would incur various costs, including:

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

When these costs are added to the original price of the home, the total expenditure reaches a staggering $1,221,120. Cardone emphasizes that to break even, the home would need to be sold for over $1.2 million, a figure that is unlikely to be achieved in many markets. He refers to this financial drain as “dead money,” highlighting how homeowners often find themselves in a cycle of debt and financial obligation without significant returns.

The Financial Burden of Homeownership

Cardone’s critique of homeownership extends beyond mere numbers. He argues that many individuals become "servants" to their mortgages, borrowing money from banks and sacrificing their financial freedom. This cycle can lead to a reliance on traditional retirement accounts, which often fund Wall Street rather than empowering individuals to build their wealth.

The financial burden of homeownership can be particularly daunting for first-time buyers, who often stretch their budgets to afford a down payment and monthly mortgage payments. This leaves little room for savings or investment in other wealth-building opportunities.

A New Approach: Renting and Investing

So, what does Cardone propose as an alternative to homeownership? He advocates for renting a home while using the money that would have gone toward a down payment to invest in real estate that generates passive income. This strategy allows individuals to maintain flexibility and liquidity while building wealth through investments.

Cardone emphasizes the potential of investing in residential real estate, which has shown resilience even during economic downturns. He suggests that individuals can explore various investment avenues, including:

• Real Estate Investment Trusts (REITs): Publicly traded companies that collect rent from tenants and distribute dividends to shareholders.
• Crowdfunding Platforms: These platforms enable everyday investors to pool their resources to purchase properties or shares in properties, democratizing access to real estate investment.

By focusing on generating cash flow through these investments, individuals can build wealth over time. Cardone believes that once sufficient passive income is generated, individuals can then consider purchasing a home or other luxury items without the financial strain typically associated with homeownership.

The Importance of Critical Thinking

While Cardone’s perspective on homeownership is thought-provoking, it is essential to approach such financial advice with a critical mindset. His views are not universally accepted, and many financial experts still advocate for homeownership as a viable path to building wealth. Additionally, Cardone has faced legal challenges regarding his investment practices, which raises questions about the motivations behind his advice.

Ultimately, personal finance is not one-size-fits-all. What works for one individual may not be suitable for another. Factors such as personal circumstances, financial goals, and risk tolerance should all be considered when making decisions about homeownership and investments.

Conclusion

Grant Cardone’s assertion that homeownership may be the worst investment many Americans make challenges the traditional narrative surrounding the American dream. By advocating for renting and investing in income-generating real estate, Cardone encourages individuals to rethink their financial strategies. As with any financial advice, it is crucial to weigh the pros and cons and consider one’s unique situation before making significant financial decisions. Whether you choose to pursue homeownership or explore alternative investment avenues, the key is to remain informed and proactive in your financial journey.