Grant Cardone "Buying a House is for Suckers"

[Yoda]

My house didn't cost me a dollar down payment.

My house payment is 30% cheaper than rent around here because I got the lowest possible interest rate.

My house isn't paying me monthly cash flow, but it is paying my future self in the form of equity, and currently through tax deductions (split decision, moot).

My house is in a top notch school district.

When I move, I'll rent it out and re-decide using current market conditions and life style desires to determine whether I rent or buy the next.

Your point of view is right, no matter the side of the fence you're on. ***
​

***As long as you know what the F*ck you're doing.

 

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[Iwokeup]

Just curious how many people on this thread have school-aged children and live in a top tier school district? For those of you that don't, you may not understand all the dynamics around renting/owning. There are some situations where the money is secondary to other factors (stability, location, etc).

I live in a top tier area, own, and for us it's not about the money....it's about the stability of knowing where we're living, schools, etc. It's the emotional impact that has the biggest sway on us. I've lived in good rentals and bad rentals over the years (as has The Wife) and we'd much rather be in this situation than renting.

*shrug*

It's a bonus that our house has appreciated about $75K over the past three years but no one could have accurately predicted that

 

[Greg R]

It's a bonus that our house has appreciated about $75K over the past three years but no one could have accurately predicted that

However, as I referred to in my last comment, living in a great area put the odds in your favor.

Good job.

 

[Iwokeup]

Anything that ties up a large amount of cash and is not an investment should almost never be purchased. Your logic is flawed, a $100 lawnmower and a $500,000 house is an illogical argument.

There are ways to buy a house that does NOT involve lots of money.

Veterans can use the VA Home Loan program (on one home at a time) and pay NOTHING down (we actually MADE ~$4500 when we bought). So for us it's made tons of sense.

 

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[Iwokeup]

However, as I referred to in my last comment, living in a great area put the odds in your favor.

Good job.

Yep. I like what you said about:

• opportunity costs
• costs incurred by moving
• the friction of not knowing where things are, getting routines down, the extra time and mental energy expended by EVERYONE in a new situation
• Or by having the Landlord say, "Hey, we sold the house. Not sure if they'll renew the lease." (Been there)
• Never feeling like you have a home.
• Etc

 

[MJ DeMarco]

I'd argue you're a sucker when you take advice from gurus who dispense absolute statements of a "one size fits all" variant, totally disrespecting individual values, personalities, and preferences.

 

[jon.a]

I've done the math and I've seen the math done by other, very intelligent people. In general, the total cost of renting and ownership are going to be about the same over the long-term, assuming you normalize for market fluctuations and amortize the closing costs over a reasonable period of time (at least 10 years).

The reason the two are about equivalent isn't coincidence -- the cost of ownership for a landlord is about the same as the cost of ownership for an owner occupant, so tenants will get passed on the real costs of ownership as part of their rent. In addition, renters are going to be paying a premium over that cost of ownership (the profit the landlord makes) -- this premium is in return for being able to transition from location to location without the overhead of transaction costs.

So, typically speaking, renters will be paying a little more, and that extra cost is the price for freedom of change. Renters can also amortize the cost over longer period of time, as they don't pay upfront transaction costs. Given the time value of money, this is a benefit to renters that *could* outweigh the extra cost of renting. Additionally, if someone is going to be staying put for 10+ years, it generally gets a little bit cheaper to own because those transaction costs are amortized for ownership as well.

Long story short, the financials are about the same...it's the non-financial aspects that people need to weigh...

Well said.

 

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[RHL]

This is the simplest problem ever. Is it possible to profit off of being a landlord? If the answer is yes, then there is some hypothetical scenario in which owning is cheaper than renting, because the existence of a margin on the landlord's end assumes "fat" that the owner can cut by taking possession herself. The one assumes the other.

Now, other considerations might make the money "not worth it," making it a "better deal" to rent. I don't disagree with that one bit. Even at very low levels of wealth, people often figure that cutting the grass, cleaning the pool, and fixing the pipes are not a good use of their time. They may place huge value on relocating frequently or having multiple homes. That's totally legitimate, obviously.

But if the only thing under scrutiny is "which is cheaper," anywhere that renting is viable as an income stream, it is mathematically necessary that owning be cheaper than renting. Period.*

*There are a couple of exceptions, like military BHA, designated housing for university faculty, etc., but those are obviously right out in this case because you can't buy a piece of Yale or a piece of a naval base.

 

[CPisHere]

I've done the math and I've seen the math done by other, very intelligent people. In general, the total cost of renting and ownership are going to be about the same over the long-term, assuming you normalize for market fluctuations and amortize the closing costs over a reasonable period of time (at least 10 years).

That assumption about how long to amortize closing costs is the key.

 

[biggeemac]

I decided back when I bought my first house that, unless the house can pay EASILY for itself if I lose my job, then there is no sense in buying. Renting would make more sense. @458 's statement that D Trump lives onsite at Trump Towers which is one of his income generators is the approach I have taken. My mortgage should be paid regardless of my employment status. Doing the 2+plex method and renting out the other unit(s) is only one very small method to achieve this. I bought my second house last year, which had 6 bedrooms + an unfinished basement. I am finishing the basement. I will easily will easily triple the cost of the mortgage in income with my basement, and I won't be renting to the standard rental market (don't want the headache).

Buy a house that will support a PROFITABLE business of some sort. The business (not your living needs) should be the first priority. That's my thought.

 

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[ddall]

Cardone is intentionally issuing controversial statements for this very reason: So he can get mentions, likes, shares, etc all across social media and funnel people into his courses and build his popularity/personal brand. Granted, he is an effective motivational speaker and salesmen, but outside of some real estate his business is in selling hype and 'sales training' (it's not bad stuff). He just released Millionaire Playbook, which is a small value add/trip wire ($5 audio book) to point people to his bigger buys like Cardone University.

 

[OldFaithful]

This is the simplest problem ever. Is it possible to profit off of being a landlord? If the answer is yes, then there is some hypothetical scenario in which owning is cheaper than renting, because the existence of a margin on the landlord's end assumes "fat" that the owner can cut by taking possession herself. The one assumes the other.

My initial point, exactly. Very well put.

 

[EvanOkanagan]

buy a multi family - live in part - rent out the other units ????? live for free Profit?

^^This.

I live (with profit) in an 1100sqft fully reno'd basement suite of a 2 suite house. Bright with 2 bedrooms and an office. I rent out the 4 bedroom main of the house.

Total rents from house: $2,480
Renting out detached garage: $300/mo
Mtg, taxes & insurance: $2,120

Positive Cashflow: $660/mo

I really don't believe this scenario can work in every city though. I live a few hours away from Vancouver and I wouldn't invest in rental properties because the cashflow spread isn't there with home values being so high.

If you know what to look for, and there's a decent rental market in your city that supports positive cashflow with the home prices it is possible.

 

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[jon.a]

^^This.

I live (with profit) in an 1100sqft fully reno'd basement suite of a 2 suite house. Bright with 2 bedrooms and an office. I rent out the 4 bedroom main of the house.

Total rents from house: $2,480
Renting out detached garage: $300/mo
Mtg, taxes & insurance: $2,120

Positive Cashflow: $660/mo

I really don't believe this scenario can work in every city though. I live a few hours away from Vancouver and I wouldn't invest in rental properties because the cashflow spread isn't there with home values being so high.

If you know what to look for, and there's a decent rental market in your city that supports positive cashflow with the home prices it is possible.

No expenses?

 

[EvanOkanagan]

No expenses?

I don't have property management as I live there. Tenants upstairs pay 70% utilities so there's 30% utility cost plus any repairs (which are minimal).

I bank all the cashflow in an account used for future rental properties (or expenses if they come up). Even if I have a larger expense though my cashflow for a single month would cover almost anything.

 

[jon.a]

I don't have property management as I live there. Tenants upstairs pay 70% utilities so there's 30% utility cost plus any repairs (which are minimal).

I bank all the cashflow in an account used for future rental properties (or expenses if they come up). Even if I have a larger expense though my cashflow for a single month would cover almost anything.

I've found the 50% rule to be pretty fair over the long run.
I'll let others expound on that if it becomes necessary.

 

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[EvanOkanagan]

I've found the 50% rule to be pretty fair over the long run.
I'll let others expound on that if it becomes necessary.

Depends on the house size. The upstairs is around 2000sqft. If it were equal size 50/50 would be fair for sure

 

[lowtek]

Just after skimming this thread I see a number of misconceptions:

1) spending money on interest on a debt to save money on your taxes is insane. You're not going to save 100% of the interest you pay, so you are losing money.

2) Most peoples' "calculations" completely ignore the cost of maintenance. It costs money to maintain a home, even one built during the last 10 years. This is a non negligible amount that, worst of all, has limited predictability.

3) It costs TIME to maintain a home. Even if you're not doing the repairs yourself, you have to deal with scheduling and vetting contractors, letting people into the property, etc.

4) There is enormous opportunity cost for the down payment money. Homes are not an investment, unless you're buying significantly below market value (in which case you would be flipping it and not living in it). Every dollar you drop on a home is money you aren't dropping into your business.

If you think a home is an "investment" you don't understand investments. Things that lose value over time just by sitting around and produce no periodic cash flow are not investments. Homes are really no different than cars.

Even accounting for irrational exuberance created by faulty government policy, homes don't keep pace with inflation over the long run. Short term gains can be had, but again please see opportunity cost.

5) There is a cost for being tied to one location. If your business, or some promotion opportunity at your high paying job, dictate that you should move, you want to be able to do that quickly and easily. Having to pay on two locations simultaneously while you wait for your home to sell (around 100 days unless you're in a hot market) also costs money, plus your insurance goes up because you're not occupying the home. Not to mention the stress you will feel while your home is unoccupied.

I agree with Grant 100%. If you don't have liquid millions you shouldn't be buying a home. You're far better off investing in yourself or your business.

 

[Justin Gesso]

There is simply not a black and white answer to this.

This answer depends on situational factors. We have a mix here of people for all sorts of life situations...young, single, married, with kids, nearing retirement, etc... We have people chiming in from all over the US, Australia, Europe, etc... These are important variables.

Personally, I live in an area that has been rapidly appreciating. I pocketed a huge gain on the sale of my first primary residence. In a comparable house, rent would have been higher and I wouldn't have walked away with that nice wad of cash. Opportunity cost? I really didn't put that much down.

Now I'm in a house that has already appreciated about $80K-$100K in just 3 years. That doesn't matter until I sell, but...

I have an RE license, so I have a great pulse on the market, can act fast, and have much lower costs of buying and selling.

Your situation is probably different, but for me...man, I just wish I had started buying sooner.

 

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[napier]

As many have already said there is no one size fits all answer. There is a house not far from me that was built and sold in 2004 for 395k. That same house was listed for sale last week for 1.25M.

 

[Ecom man]

I bought a house 3 years ago for $50k and lived in it for 3 years. Just sold it for 90k. We spent 10k on updates/maintenance over the 3 years so we made 10k a year on a 50k investment. Every situation is different but in my case owning my home was far better than renting.

 

[458]

I built a house that had about $150K in equity the minute it was completed in one of the best school districts in the country. If I had a mortgage, it would be a good bit less than renting an equivalent house in this area. So, I don't need to convince myself it was a good choice.

I simply said that YOU wouldn't consider it a good choice because you seem to think spending $500K on a house is necessarily a bad decision, and I spent more than that.

I happen to disagree with you, and I have about $150K in equity (and other benefits) to support my decision. How much equity do you have in the house you're renting?

And? Your 150k doesn't return cash, it just eats it.

 

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[Ecom man]

And? Your 150k doesn't return cash, it just eats it.

Renting a house eats cash as well so I guess we should all live in cardboard boxes under a bridge. To say that 150k in equity is nothing and renting would be better is just being ignorant.

In some situations renting is better than buying and in some buying is better than renting. To make a blanket statement about either is pointless.

 

[cutthroughstatic]

Saw this video, thought I'd get people here's opinions.

Here's some of his points -

Unless you have 20 million in the bank, in cash, you have no business buying a house.

A house is the worst investment you will ever make. If there is no income don't invest in it. Sell your house and buy rental property. I know this sounds crazy, but rent where you live and own what you can rent to others. This will create amazing wealth for you and your family over your lifetime.

I get his reasoning. As with anything in life, there is no black/white. Some situations make owning a house a poor investment, some situations would make it a smart financial decision. Just depends.

I just purchased a house. It's an older home on ten acres. I bought it for 1/3 of what the average appraised/sold prices of the other homes in the area were. The mortgage is also 1/2 of what I currently pay in rent.

The upshot of this house is that I will be saving tons of money, while also having "room" to improve it and actually increase the value of it. should I decide to sell it, I come out ahead. Either way, still cheaper than renting!

 

[SteveO]

And? Your 150k doesn't return cash, it just eats it.

If you make money, you make money.

 

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[Sanj Modha]

I own a few properties. I disagree.

 

[Sanj Modha]

Billionaire Indians, Chinese, Russians and Arabs are buying up London properties like crazy. They know something Cordone doesn't.

 

[Sanj Modha]

There's a guy on this forum who's printing money flipping houses.

Maybe he can reply.

 

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[jon.a]

There's a guy on this forum who's printing money flipping houses.

Maybe he can reply.

Flipping houses has nothing to do with the original post.

 

[Sanj Modha]

Flipping houses has nothing to do with the original post.

He owns real estate too.