Grant Cardone "Buying a House is for Suckers"

[Jon L]

15k a week three months ago, looking to do about 20k this week. We appreciate your concern in this matter and your query has been forwarded to our customer service department for further review.

Because I'm just in that kind of mood:

Doing some math on your figures...

20k a week is $1.04 M in annual revenue. Not bad, but not worthy of someone with your ego.

.01% increase in revenues generating $500,000 additional income means you're producing 500,000/0.0001 = $5B in annual revenue. Now THAT is worthy of having an ego like yours. How many billionaires do you know with an ego, though? I can think of one, and he's running for President. Most of the other ones though are quietly confident. Think: Richard Branson. Ok, maybe he's not so quiet, but I'm hoping you'll get my point.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[458]

Because I'm just in that kind of mood:

Doing some math on your figures...

20k a week is $1.04 M in annual revenue. Not bad, but not worthy of someone with your ego.

.01% increase in revenues generating $500,000 additional income means you're producing 500,000/0.0001 = $5B in annual revenue. Now THAT is worthy of having an ego like yours. How many billionaires do you know with an ego, though? I can think of one, and he's running for President. Most of the other ones though are quietly confident. Think: Richard Branson. Ok, maybe he's not so quiet, but I'm hoping you'll get my point.

Your projecting your insecurity toward an anonymous character. You wrongfully assume that my way of writing on here is a reflection of my real life.

But if you must know, I'm currently working on a project to raise 300m over 5 years. Not bad for a 27 year old kid.

Happy weekend sir.

 

[458]

Why would you write stuff here that isn't a reflection of your real life? Who are you trying to impress? It seems to me that you're the one projecting insecurity, if you have to mask your real life in your writings here.

Btw, "working on" raising $300M isn't very impressive. If you actually succeed at raising $300M, that will be a little bit impressive; if you succeed in creating value far greater than $300M using that investment, then that will be impressive. Good luck with that.

Haters gonna hate. Again, your confused with simple grammar. In real life I'm forced to be much more diplomatic to get things done, on here your support is as necessary as the fart I just let go.

 

[safff]

Haters gonna hate. Again, your confused with simple grammar. In real life I'm forced to be much more diplomatic to get things done, on here your support is as necessary as the fart I just let go.

....so pretty necessary and you find it satisfying?

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[GuestUser155]

There's a reason why the successful Silicon Valley companies and big banks are filled with people from schools like Stanford, Harvard and MIT -- those schools teach more than just facts and figures...

I'm not going into the specifics of how this statement is wrong, I'll generalize:

All a good school does is bolster your network. Yale English grad? Grats, you're now an analyst at Goldman because your OCR interviewer is from Yale.

The only time your degree really matters is in startups. As long as you have an elementary grasp of your topic, you'll do fine in already established companies because they do training.

The only schools that really teach you more are post-grad business schools (ex. HBS). And even then, it's still majorly about networking.

@everyone else:

You're wasting so much time with petty shit. Post to inform and educate other readers or don't post at all.

Even though this is a forum, you shouldn't be using this 24/7. If you need the support, validation, and all to keep on chugging away, then entrepreneurship isn't for you.

I keep making this mistake and I see others doing the same. No one gives a damn about your snide comments and quips.

Work on your fastlane, provide others with knowledge from your experience, or leave.

Quality > Quantity et al.

If you're going to meander about tonality and other miniscule things, you're not ready to learn.

And as a segue:

Robert Kyosaki also says something very powerful. It´s cashflow what makes you rich (not assets that can appreciate) and cashflow that comes from a rented property is the best cashflow there is.

I just recently realized how true it is, once the stock marker recovers I´ll sell and never get back

Recovers from what, exactly?

We're at all-time highs, the market's only down 2% in the last month. Are you really going to waste time for a measly 2%?

Even if the market was down 40%, would you really waste 6 years to get your 40% back?

Venture capital aims for a 400% return in a few years. Think about how much money you could make if you just started a business right now instead of twiddling your thumbs.

 

[Torobaro]

Recovers from what, exactly?

We're at all-time highs, the market's only down 2% in the last month. Are you really going to waste time for a measly 2%?

Even if the market was down 40%, would you really waste 6 years to get your 40% back?

Venture capital aims for a 400% return in a few years. Think about how much money you could make if you just started a business right now instead of twiddling your thumbs.

Yes, I totally agree with you.

As a matter of fact I am starting a business, and I am just waiting to see if I don´t lose money when I sell. Selling that investment in stocks wouldn't´t have an impact at the speed I am working on my business at least for now.

 

[johnnylightning]

Buying a house was the best investment I ever made. At the time, I purchased as we were pregnant and wanted a forever lot (hoping to rebuild at some point). Sure, there was some a degree of luck in the timing but buying in the best area you can and the biggest piece of land that you can reasonably afford increases your changes to a decent ROI.

Purchased 2011: $650,000
Conservative Value 2016: $1,300,000 (house value is $75,000 but renovated to a comfortable standard of living 4 beds, 3 baths, 2500 sq ft with an ocean view).

In Canada, the increase in value is tax free if we sell as it's our primary residence. The house also brings in $800 a month from the basement apartment which is incredibly easy to rent out. This extra bit of income initially let my wife stay at home with the kids as long as she wanted.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[JustAskBenWhy]

Grant typically over-glamoureizes REI, and I told him so at one time on his show. But, in this case - he is right!

The problem with ownership is 2-fold:

1 - costs go up every year.
2 - you are bound to one place.

When buying a home, therefore, you have to alleviate these problems either via income or equity. Or better yet - both!

Income is a matter of being able to move out and rent the property for more than you cost. And equity is a matter of buying below intrinsic value. If you can do both, then buy. Because it's stupid not to considering you can use someone else's money. But, if you want to be a retail buyer, I agree with Cardone - bad idea.

 

[ravenspear]

1 - costs go up every year.

They do so with rent too, and in many cases they go up faster than with owning.

2 - you are bound to one place.

This is true, but this is more of a value judgement on how much you value mobility, not really a direct financial comparison.

 

[JustAskBenWhy]

They do so with rent too, and in many cases they go up faster than with owning.


This is true, but this is more of a value judgement on how much you value mobility, not really a direct financial comparison.

Unless you've owned property for at least 7 years, I am not really interested in continuing the conversation. Have you owned property, investment or otherwise, for longer than 7 years?

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[ravenspear]

Unless you've owned property for at least 7 years, I am not really interested in continuing the conversation. Have you owned property, investment or otherwise, for longer than 7 years?

I have primarily rented for the past 7 years, which is why I decided to buy as it really made more financial sense once I ran the numbers.

In just the past 4 years my rent increased by over 30%. While property taxes and other ownership expenses certainly do increase over time, rents are increasing even faster in my area.

 

[Schwartz]

Unless you've owned property for at least 7 years, I am not really interested in continuing the conversation. Have you owned property, investment or otherwise, for longer than 7 years?

I've spent the last 7 years of my life moving around the USA. I've moved over 16 times in my life and for the first time I just bought a house. However I didn't use all or even a significant portion of my net and put 20% down on the house my costs per month to live here are peanuts if I lost everything tomorrow I could go work at the 7/11 and still make enough to cover my living expense. On the other hand renting was fine while it suited my lifestyle which it no longer does. There is no cookie cutter approach to business and life each man has to make his own choices and usually has a reason for them.

 

[ZF Lee]

I've moved once and will soon in a few months.
We WILL move constantly until we get our dream mansion (which will most likely be built, customised and constructed with the Fastlane fruits at our disposal), not just some ordinary place from which the local teacher just moved out.

Unfortunately, too many youngsters load themselves with too much needless debt to get a house, and they are not even real estate players!

Watched Grant's video. What he says is spot on. His 2 min Rant videos offer more insight as well into his principles.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[MJ DeMarco]

Unless you've owned property for at least 7 years, I am not really interested in continuing the conversation. Have you owned property, investment or otherwise, for longer than 7 years?

Yes, I have.

1 - costs go up every year.

To suggest they don't increase for renters is being intellectually dishonest -- landlords pass the costs down to renters.

2 - you are bound to one place.

LOL, I'm not bound to any place just because I have a $250 electric bill and a yearly tax payment.

To suggest that someone who values living in their resort style home is a SUCKER vs someone who'd rather vagabond around the planet is disingenuous douchebaggery.

Again, absolutes assume absolute personalities.

I could say flamboyant Instagram playboys are suckers but I don't because I'm sure it's just a reflection of their values, their personality, and what's important to them. What's good for me isn't good for someone else, and vice versa.

And this is exactly why someone who loves the Slowlane is not better or worse than the rest of us.

 

[JustAskBenWhy]

Yes, I have.



To suggest they don't increase for renters is being intellectually dishonest -- landlords pass the costs down to renters.



LOL, I'm not bound to any place just because I have a $250 electric bill and a yearly tax payment.

To suggest that someone who values living in their resort style home is a SUCKER vs someone who'd rather vagabond around the planet is disingenuous douchebaggery.

Again, absolutes assume absolute personalities.

I could say flamboyant Instagram playboys are suckers but I don't because I'm sure it's just a reflection of their values, their personality, and what's important to them. What's good for me isn't good for someone else, and vice versa.

And this is exactly why someone who loves the Slowlane is not better or worse than the rest of us.

Haha are you picking a fight, MJ?

I sold several properties this year. In all cases I had to spend substantive money in order to sell...that's how that rolls.
I've spent pretty sizable money on the other assets as well, between r&M and CapEx...that's how that rolls.

Having property is a financial commitment. It requires discipline in more than one way.

On the other hand, a tenant sends me an email 3 weeks ago saying: my dad was killed in a motorcycle accident, and my mom is a mess - I may need to break the lease to go live with her for a while. What's the deal...? My answer - the deal is forfeit of sec. deposit + 1 additional rental payment, and you are free to go, just be sure to clean up...

What Cardone is saying is rather basic - A: It's a lot cheaper to rent for most people, specifically those on W2 income. And B: renting offers an out which is a lot less painful financially, and a lot quicker.

I worked for 6 months to sell 6 doors, and it cost me. My tenant was out in 2 weeks, with minimal impact to her financial position.

There are more than one way to slice this issue. But, at the end of the day, Cardone has a point of view that needs to be considered.

 

[JustAskBenWhy]

owning doesn't have additional financial commitment over and above renting.

Jason - that's the silliest thing I've heard from you...ever...

That leaky faucet, clogged toilet, busted tile in the bath, flooded basement, cracked window, seized-up garbage disposal, etc. (and I am not even talking HVAC which some times breaks, roof which sometimes leaks, or any other big items)...

All of those are the landlord's costs in a rental situation. Yes, some of the costs can be passed onto tenants, but very few. These are all owner's costs in a owner-occupant situation. Would you mind explaining to me how ownership is not more of a financial commitment than renting?

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[JustAskBenWhy]

At the beginning of this year, the average price::rent ratio across the United States was about 19. So, a house that you could rent for $1000/month would typically cost about $228,000 to buy. Assuming someone puts down 30% on the purchase, and they get a $160,000 mortgage @ 4% for 30 years, they're going to pay about $765/month in P&I. Add in property taxes (US average in 2015 was .9%), and that's $170/month. Add homeowners insurance (average of $3.50 per thousand across the US), and that's another $65/month. That takes the cost of ownership to pretty much exactly the same as renting -- right about $1000/month.

This is about what we'd expect in an efficient market...

Now, as you pointed out, this doesn't include the cost of maintenance and capex owner's incur. Typically, we factor about 1% of the house price per year in maintenance -- in this case, about $2300/year. In addition, for capex on my rentals, I like to pro-rate at about .5% of the house price -- in this case, in this case, that's about $1150/year. That doesn't include additional upkeep (lawn care, etc) -- for my rentals, I always assume we're at about .5% for this stuff, or about $1150/year. So, total cost of ownership above and beyond P&I, taxes and insurance is about $4600/year.

But, we also haven't factored in the equity the owner accrues on his loan payments. Assuming the market is completely flat during the time of ownership, the question becomes: At what point does equity accrual on the $1000/month P&I payments average out to the $4600/year cost of maintaining the house? Turns out that's right about the 10-year mark.

So, assuming no appreciation of the property, over 10 years ownership, the total financial burden of owning versus renting is almost equivalent. Interestingly enough, I did the same analysis using a completely different methodology two pages back in this thread -- my result was exactly the same. If you're going to live in the property for 10 years, the financial burden between renting and owning is going to be about the same. Less than 10 years, cheaper to rent; more than 10 years, cheaper to own.

Now, you could certainly argue that owning requires coming up with cash sooner than you receive equivalent value in equity, and that's certainly true. But, if you can't handle the cash flow variations that owning requires, you're probably not in good enough financial shape to even be going through this exercise and considering a purchase.

Interesting analysis, J. Now for a bit of intellectual honesty - how many out of 100 buyers are putting down 30% do you think? Perhaps 3? This means that your cash flow analysis is off...by a lot...

Now - you may premise that unless one is able to put down 30%, one is not in financial position to buy. I am not passing judgement here, but this would support Cardone's point that most people chasing the American dream of home-onwership are suckers who should be renting instead

 

[throttleforward]

I am fascinated by this discussion, as I live in a high property value place (Washington DC) and choose to rent at well below market rate as opposed to own, so that we can afford quality child care and avoid commuting. The vast majority of my colleagues choose to commute from 1-2 hours ONE WAY - and a significant portion of the workforce up here actually has a family and spouse that lives in another state, who they see on weekends (it's cheaper for them to have a house in Norfolk, VA and rent an apartment or room 4 days/week in DC than it is to buy a house in the DC area). In one extreme case, a colleague was considering getting a pilot license and buying a small plane for his daily commute from a rural area of Virginia to DC every day.


I've found this calculator helpful in making my personal rent/own decisions.

http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0

 

[ZF Lee]

Having a roof over your head -- whether owning or renting -- is a financial commitment.

Owning -- as opposed to renting -- has a lifestyle commitment as well. But, except in rare cases -- where the buyer probably shouldn't be buying anyway -- owning doesn't have additional financial commitment over and above renting.

Unfortunately, the new graduates in my country who just got fresh squeaky jobs don't understand that. They load debt up pretty quickly buying that uptown townhouse and realise it too late....all for the want of approval of the social norms AKA keeping up with the Joneses.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[JustAskBenWhy]

Personally, I think you shouldn't purchase a house if you can't pay for it in cash. But, regardless, if you can't put down 30%, you can't afford the house.

That said, my analysis actually left out a lot of things (that are difficult to account for):

- The cost of moving when you rent (typical leases are only 1-2 years and landlords don't always offer renewal)
- Rental rates tend to increase over time; mortgage payments do not
- Real property tends to appreciate in value over time; rentals only appreciate for the landlord, not the tenant
- When you buy, you have closing costs on each side
- When you have a mortgage, you get an interest deduction
- Rents tend to scale more quickly than home prices in areas with better schools
- Etc...

When you factor all those things in, my gut tells me it's about a wash, regardless of how much you put down. If someone (like Cardone) is telling you that financially it's a slam dunk one way or the other, he's either lying or ignorant. That said, I've provided two different analyses in this thread, both of which I think are pretty realistic, and both came up with the same numbers.

The fact that anyone thinks Grant Cardone is taking a position on this without considering his own horse in the race is ridiculous. Supposedly, he owns thousands of rental units, so it's in his best (financial) interest to tell people to rent. If you were to ask Gary Keller the same question, I'm guessing he'd tell you just as emphatically that owning is a better decision. Do you think Cardone is smarter than Keller (or vice-versa)? Nope, they just each have opposite agendas.

I, on the other hand, have no horse in the race. I provided a couple analyses to back up my take on the question (with the answer in both cases being that after a 10-year hold, the advantage goes to buying), and people are welcome to consider what I wrote or ignore it...doesn't matter to me.

Well, now we are getting somewhere...

I agree - the best way to buy a primary is all cash. Why - because you are buying an aging depreciating asset, and an all equity position is simply the safest exit. The way to off-set this reality is through leverage by passing along the debt service, but this brings us out of the primary and into investment sphere, which is not the point.

You mention 30% down as the criterion determining someone's financial capacity to be an owner. Implementing this would be the fastest way to crash the residential market, J, and you know it. Good for us, bad for the economy... And without the 30% down, with the debt service being higher, your calculus will alter drastically. And, just as an afterthought - can you imagine the outrage from Nancy Pelocy, Harry Reid, and everyone else on the left...we are keeping the minorities from being able to own a home...how dare you?! LOL

But, at the end of the day, here is the honest to God truth - it is more difficult to walk out of a house than it is to walk away from a rental. This means that you become necessarily slower to respond to opportunities out of the area. Cardone's point is simply that in this transient economy there is more value for most people (certainly W2 people) to be detached from the necessity to sell the house. And if you are right, and the financial aspect balances out over time, this simply reinforces the point - with financial aspect being a wash, rent and be unattached, which in today's economy has a measure of value.

That's the broad strokes to help the thinking juices flowing, nothing more. I will always own (actually in an apartment now, but under contract to buy a primary), but I have a family and for us renting is impractical. But, Cardone's message is appropriate for a lot of younger generation to ponder...

 

[JustAskBenWhy]

Unfortunately, the new graduates in my country who just got fresh squeaky jobs don't understand that. They load debt up pretty quickly buying that uptown townhouse and realise it too late....all for the want of approval of the social norms AKA keeping up with the Joneses.

That is a very primitive point of view

 

[JustAskBenWhy]

You, or perhaps Cardone, is presupposing that responding to opportunity is more important than stability. For my family, at least, it's not. I'd rather have a slower response to an opportunity than to give a landlord the ability to disrupt my kids' school year or force my wife to move out of a place we call home. And for anyone who necessarily believes opportunity is better than stability when it comes to family, I'd suggest they dont understand the priorities that many of us have.

I am not presuming this at all, which is why I am under contract to buy. I picked up and went cross country because my kids were accepted into the school I wanted for them. And, I am staying put for a while for the same reason. Which is why I am buying a primary.

However, understand who Cardone's audience is - a young wanna be, with a college degree, who's primary objective in life is to climb that corporate ladder. Most don't have children. Most likely are not attached. Ability to relocate is paramount to them in pursuit of that W2 growth...

Life's circumstance drifting away from opportunistic to stable affect a reallocation of value. Both opportunity and stability are not free - there is a cost. Jason - both you and I could be living wherever. We chose to be where we are because stability has more value for us than opportunity. For us Cardone's message is silly, but for lots of people his message is right on!

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[biophase]

Just to jump in here again as the debate seems to be about mobility and the landlord deciding not to renew your lease again.

What is interesting is that when the housing market is going up. Landlords will get out of the market by selling. Therefore, the higher chances that you will get forced to move. Coincidentally, this is probably the worse time for someone to decide to buy vs rent.

When the market is going down. Landlords are just hoping that their tenants keep staying. Coincidentally, this is probably the best time for someone to decide to buy vs rent.

When the market was going up and getting loans was easy, it was sooo easy to sell to my tenants at the top of the market. I wanted to sell and they wanted to buy. I can tell you that none of those tenants were able to keep their homes when the market crashed.

 

[MJ DeMarco]

Cardone has a point of view that needs to be considered.

Absolutely, especially for those who aren't homebodies and love to travel and be mobile.

But using a blanket statement that home buyers are suckers is NOT asking for a point of view to be "considered" -- it's an absolute statement of fact just waiting to be shredded by someone like me who doesn't like to travel and considers his home a permanent hotel and resort.

 

[G-Man]

Is it bad that I have a hard time paying attention to this debate because all I wanna know about Cardone is if he makes more money from his books, seminars, etc than he does from actual real estate?

EDIT: His often outrageous statements may or may not be true. What's definitely true: They are a great way to get Youtube views.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[JustAskBenWhy]

Absolutely, especially for those who aren't homebodies and love to travel and be mobile.

But using a blanket statement that home buyers are suckers is NOT asking for a point of view to be "considered" -- it's an absolute statement of fact just waiting to be shredded by someone like me who doesn't like to travel and considers his home a permanent hotel and resort.

MJ - Cardone is in the information business. Of course his delivery will be sensational in nature. What he says, therefore, needs to be discounted. However, having discounted his message, might there is still positive value in it...?

At the end of the day, we can, as Jason apparently has, discount to zero anything said so long as the messenger has a horse in the race. Folks are free to do that, but I think that's a mistake. Yes - Cardone is convoluted as all hell. But, while most things he says aren't worth repeating, this had value. Enough value to start a conversation here, I might add

 

[JustAskBenWhy]

I don't know for certain, but based on listening to a few of his real estate interviews, I wasn't convinced that he is actively managing his own portfolio. Some clear gaps in knowledge that I wouldn't expect from someone claiming to do the scale he's doing. It's also possible he's just riding the market...

I don't disagree with that - it seems that way... But, this thread is not Cardone talking - it's me offering commentary on Cardone. And thus, the question is not whether you care about anything he says, but whether you care for my opinion on what he says...and I hope that you do

 

[JustAskBenWhy]

I apologize if that what my implication. I didn't mean to say that he was wrong because he has a horse in the race. I meant to say that he was wrong because he's wrong (at least from a generalization standpoint).

HAHAH Joson - you never get old!!!!

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Marquin Brewer]

I disagree. Buying a house you cannot afford is for suckers, I would agree with, and this is what most people do. Also, putting a huge percentage of your net worth into one house is also stupid, which is again what most people do.

But buying a cheap house is a better deal than renting, assuming the down payment is not all or a huge percentage of your net worth.

I'm buying my first house this year and I ran the numbers in detail. I'm currently spending $1200/mo on rent. If I buy a small condo or house in my area, I will be spending around $500/mo in mortgage interest, around $250/mo in property taxes, and around $75 on insurance. That's $825 monthly outflow. (Mortgage principal is simply an investment in real estate so its not calculated as an expense). But I will be getting around $300 in additional income from tax deductions on mortgage interest and property taxes, AND around $500/mo in home value appreciation assuming a conservative 2% rate of appreciation (most houses in my area are appreciating faster). Add those and I will be getting $800/mo in new net inflow. So essentially that's breaking even. My net worth will neither increase nor decrease (~$825 out/~$800 in) from having a mortgage on a small house, due to buying within my means (keeping mortgage interest low), getting the tax advantages from home ownership, and factoring in a conservative rate of home appreciation. This is a MUCH better deal than losing $1200/mo in net worth through renting.

Obviously I'm not factoring in maintenance here but that will be nowhere near $1200/mo so it's still a much better deal than renting. I'm also aware that the closing costs are a net worth hit but they will be paid for within 6 months by my calculations.

Many people forget that home ownership is tax incentivized (at least in the US) and proper tax planning is one of the critical components to creating wealth.

I don't agree that's slowlane jargon that's been spoon fed to us, tax incentive, homeownership bullcrap that's given out by banks and mortgage companies. Here's the skinny if your renting your paying someone else making them wealthy or a mortgage which comes from the French word mort-gage =pledge to the death. Paying a standard amortization schedule is what banks want you pay 3x what the house is worth....If you don't collect the rent your making someone else wealthy....An asset is anything that puts money in your pocket. A liability is anything that takes money out of your pocket.

 

[JustAskBenWhy]

I don't agree that's slowlane jargon that's been spoon fed to us, tax incentive, homeownership bullcrap that's given out by banks and mortgage companies. Here's the skinny if your renting your paying someone else making them wealthy or a mortgage which comes from the French word mort-gage =pledge to the death. Paying a standard amortization schedule is what banks want you pay 3x what the house is worth....If you don't collect the rent your making someone else wealthy....An asset is anything that puts money in your pocket. A liability is anything that takes money out of your pocket.

What if you collect $700/month of rent, but have to do an eviction and it takes you 2 months to fill the place back up. And 7 months later you have to spend $5,300 to replace the roof. Is that house putting money in your pocket then?