I’m a Real Estate Investor: Here’s Why Grant Cardone Is Wrong About Homebuying
In a recent Instagram post, American businessman and real estate investor Grant Cardone shared a controversial opinion on home buying. He boldly stated, “Buying a home without a doubt is the WORST investment people can make, yet it’s also the most common one. Is it because [of] the lack of knowledge people have when it comes to financial education? Or is it just because too many people are trying to fulfill their American dream?”
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It’s ironic that Cardone, a real estate mogul who built a $4 billion multi-family property portfolio from scratch, challenges the idea of homeownership. His argument? After factoring in the considerable costs associated with homeownership, including broker fees, bank interest, property taxes and maintenance expenses, Cardone believes many homeowners struggle to break even, let alone turn a profit when selling their homes.
GOBankingRates asked Dr. Mark Poole, real estate investing expert and founder of the online real estate publication Smarter Property Investment, what he thought about Grant Cardone’s unconventional point of view, and he laid out four reasons homeownership could justify the costs.
Not All Real Estate Is the Same
“First of all, not all real estate is the same. Instead of buying a property at full retail value, you can buy one that needs work. Completing the work — perhaps a refurbishment or extension — can add value over and above the cost of doing the works, forcing the appreciation of the property and creating equity, increasing your net worth,” Poole explained.
“Similarly, you can also buy at a discount,” he said. “Perhaps the vendor needs to move quickly and will accept a discount in return for a quick sale. But the market value remains the same, creating extra equity for you to realize in the future.”
Of course, property values could fluctuate due to economic conditions and unforeseen events, which may leave you with a property that’s worth less than what you paid for it. But if you perform your due diligence and purchase a home below market value, you can often use a cash-out refinance to take money out of the property if it goes up in value.
Say you have a $100,000 loan on the property, but the house is now worth $180,000 — you could convert a portion of this $80,000 home equity into cash.
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Real Estate Is Not a Liability
“Although you will have to pay mortgage interest and property taxes, the alternative is to pay ever-increasing rents. After all, you need somewhere to live! So, as a homeowner, you benefit by not having to pay rent,” Poole said.
And instead of paying rent to a landlord, your mortgage payments allow you to gradually increase your ownership stake in the property. In other words, the loan on a house is the liability, not the house itself.
Plus, owning real estate can offer tax advantages, including deductions for mortgage interest, property taxes and depreciation. In 2024, you can deduct up to $10,000 of property taxes as a married couple filing jointly — or $5,000 if you’re single or married filing separately.
A Mortgage Can Be Seen as a Forced Savings Account
Unlike other forms of saving where you have the flexibility to decide how much and when to contribute, a mortgage requires you to make regular payments. This enforced discipline ensures you’re consistently setting aside funds for your future.
“Assuming you take out a repayment mortgage and meet the mortgage payments every month, then by the time the mortgage ends — usually 30 years — you will own an unencumbered property, simply by doing nothing else,” Poole said. “The alternative is to rent until, well, you die. And when retired, you will need significant income-producing assets just to meet your rent payments if you’re a tenant.”
Renting Isn’t Always Better
Proponents of renting over buying often quote that their capital is better invested elsewhere while they rent, until the returns are sufficient to purchase their own home outright. While there’s nothing wrong with this logic, Poole believes that renting isn’t always better.
“In a rental property, you’re constrained by what you can do to it. You cannot change or configure the property to suit your lifestyle without the landlord’s permission. The alternative is to move, which is huge upheaval,” Poole explained.
“Plus, you’re only one eviction notice away from having to move,” he added. “This places a level of uncertainty on your housing arrangements going forward, and it may be difficult and stressful to find a similar place locally.”
Not only is renting inconvenient if you prefer stability, but it’s also becoming unaffordable for many Americans. According to America’s Rental Housing 2024, a new report released on January 25 by the Harvard Joint Center for Housing Studies, the number of renter households spending more than 30% of their income on rent increased by 2 million in just three years, reaching a record high of 22.4 million.
Should You Buy a Home?
What’s the verdict? Is becoming a homeowner the right move for you? Well, it’s not a simple yes or no answer.
Though Grant Cardone’s statement that buying a house is the worst investment you could ever make is a bit extreme, there’s some truth to it. Becoming a homeowner has many benefits, as Poole mentioned, but it also comes with commonly overlooked costs, such as escrow payments, home repairs and maintenance, property taxes and PMI, which can quickly add up.
So, don’t get pressured into buying a house to keep up with the Joneses. Take your time, weigh the pros and cons, and make a choice that will genuinely make you happy and financially secure in the long run.
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This article originally appeared on GOBankingRates.com: I’m a Real Estate Investor: Here’s Why Grant Cardone Is Wrong About Homebuying
