Grant Cardone is known as an entrepreneur, marketer and motivational speaker, in addition to being the bestselling author of “The 10X Rule.” One of his many business enterprises is managing a large portfolio of multi-family real estate properties through his investment firm, Cardone Capital.
In a recent tweet — or post or whatever we’re calling them on Twitter now — Cardone laid out five reasons higher interest rates can actually be beneficial to investors looking to buy multi-family properties.
GOBankingRates asked Will Matheson, co-founder and managing partner of Matheson Capital — an investment firm specializing in multi-family real estate — to give his expert opinion on Cardone’s claims.
Also see Grant Cardone’s No. 1 way to use passive income to build wealth.
Higher Rates Push Multi-Family Prices Down
Cardone points out that higher interest rates tend to force the price of multi-family real estate down. This is especially true when rates rise quickly. Cardone says falling prices will allow buyers to purchase and achieve a basis that you would never see in a low-rate environment (basis, or cost basis, is the price paid for an asset).
Matheson rated this claim as true, saying that “the higher cost of debt pushes prices down, allowing for a lower basis.”
Higher Rates Don’t Necessarily Impact Cash Flow
Operating cash flow is a critical factor in real estate investing, especially in multi-family. Cardone’s third point states that higher rates on new purchases should not negatively impact the cash flow when purchased at the right price.
Matheson rated this claim as only somewhat true, saying, “The ‘right price’ is doing a lot of work there. Interest rates are up as much as 500 basis points over the last 18 months. … Cap rates (net operating income of a property divided by price) have not increased as much as interest rates, [so] cash flow is almost certainly being negatively impacted by higher rates.”
Higher Rates Force Some Owners To Sell
Cardone next says that higher rates put pressure on certain types of owners, like short-term buyers, builder-sellers and syndicators (buyers who invest on behalf of multiple investors). These types of investors often don’t plan on owning a property for long. In an environment where prices are already falling, forced sellers entering the market usually drives prices down even further. This would obviously be a benefit to those currently looking to buy.
Matheson also rated this claim as true, saying, “Many people who bought in 2020 and 2021 will be forced to sell due to higher interest rates.”
Higher Rates Have a Chilling Effect on the Market
Cardone’s next point is that as rates rise, it serves to remove the “frenzy” from the real estate market. The thinking here is that in an extremely low interest rate environment — such as the one in the U.S. that lasted years before the Fed finally started raising rates to fight runaway inflation — there are many more market participants. The low cost of debt means that there is a low barrier to entry. However, in a high rate environment, there is less competition, which often means better rates of return for those who do buy.
Matheson rated this claim as true, agreeing that “a lot of buyers are out of the market.”
You Can Refinance If Rates Come Down
Cardone’s final claim looks to a future where interest rates have fallen. He asserts that when rates come, “and they will,” owners of property bought at a much lower basis than would be typical can now refinance their investment. In certain cases, you can pull money out at time of refinance without tax implications — meaning you can realize at least a partial capital return without having to incur a capital gains tax.
Matheson rates this final claim as possibly true, noting that there is no guarantee that an owner will be able to refinance. Despite Cardone’s claim, there is also no guarantee that rates will come down — although history indicates that they should eventually, that can take years.
More From GOBankingRates
- 7 Household Products To Always Buy in Bulk at Costco
- Average Cost of Groceries Per Month: How Much Should You Be Spending?
- 7 Things to Do With Your Savings in 2024 to Grow Your Wealth
- 4 Reasons You Should Be Getting Your Paycheck Early, According to An Expert
FAQs
Here's what he said: “A house is a terrible investment because you have to buy the house; because you have to lock into a 30-year loan; because you have to pay property taxes for 30-years, that you have no control over. And, you have to put insurance on that house.
What is Grant Cardone strategy? ›
Cardone's 40/40/20 rule is part of his overall wealth creation formula, which says that you should earn as much income as possible and save as much of that income as possible until you can afford to invest in income-producing assets.
Is Grant Cardone a real estate Mogul? ›
'Most massive opportunity of my 66 years': Real estate mogul Grant Cardone predicts average US rent will almost double over the next decade — and he thinks it's a golden opportunity.
How much is Cardone worth? ›
Celebrity Net Worth estimates Grant Cardone's net worth at a whopping $600 million. This impressive figure makes him one of the wealthiest entrepreneurs in the United States.
What is the minimum to invest in Cardone? ›
The Cardone Capital minimum investment depends on whether or not you're an accredited investor. The minimum investment for non-accredited investors is $5,000. The Cardone Capital minimum investment for accredited investors is $100,000.
At what age did Grant Cardone become a millionaire? ›
“I remember that $3,000 leap better than I remember the first million I made because it was probably more important to me,” Cardone told CNBC. He began using his earnings to invest in real estate and by the 30 he was a millionaire.
What is the 10 times rule Grant Cardone? ›
The 10X Rule says that 1) you should set targets for yourself that are 10X greater than what you believe you can achieve and 2) you should take actions that are 10X greater than what you believe are necessary to achieve your goals.
What is the 40-40-20 rule? ›
The 40/40/20 rule comes in during the saving phase of his wealth creation formula. Cardone says that from your gross income, 40% should be set aside for taxes, 40% should be saved, and you should live off of the remaining 20%.
What is the 40 40 20 investment strategy? ›
The strategy comprises of 40 per cent in hybrid funds, 40 per cent in diversified equity funds and the remaining 20 per cent targets specific sectors. He also shares his outlook on the stock markets and the themes and strategies which are likely to play out in future.
How does Grant Cardone get paid? ›
Cardone's net worth is primarily derived from his vast real estate portfolio, including residential and commercial properties across the United States. In addition to his investments, he generates income through his speaking engagements, book sales, online courses, and other business ventures.
Grant Cardone believes that investing in income-producing real estate is one of the best ways to build wealth, and he practices what he preaches. He currently owns and operates a portfolio of over $4 billion in multifamily properties. Of course, some real estate investments will pay off more than others.
Is Cardone Ventures legit? ›
Cardone Ventures has an overall rating of 4.2 out of 5, based on over 112 reviews left anonymously by employees. 68% of employees would recommend working at Cardone Ventures to a friend and 73% have a positive outlook for the business. This rating has decreased by 6% over the last 12 months.
How much does Grant Cardone pay his employees? ›
Average Grant Cardone Enterprises hourly pay ranges from approximately $19.40 per hour for E-commerce Specialist to $24.19 per hour for Operations Assistant.
Who is the richest real estate investor? ›
1. Lee Shau Kee
Lee Shau Kee, with a staggering net worth of $28.6 billion in 2024, reigns supreme as the foremost figure among the world's top real estate investors.
How many jets does Grant Cardone have? ›
Grant has gone from having never stepped onto a private jet in 2015 to owning a Gulfstream G200, a G550, and now a G650ER – all in just six years.
Why do people say a house is a bad investment? ›
A Home is an Unproductive Asset
Owning businesses, stocks and bonds are good examples of investments that pay you cash each year. Primary residences are unproductive assets. Not only don't they pay you dividends, they actually take money out of your pocket every single month like clockwork!
Why is buying a home not an investment? ›
In addition to the down payment, there are a number of ongoing costs specific to homeownership, too, including mortgage payments and interest, property taxes, utilities, homeowners association fees and ongoing repairs. All of these expenses may make homeownership out of the question.
Can real estate be a bad investment? ›
Real estate has consistently ranked in the top place among Americans as the best long-term investment for decades. Real estate investing can be lucrative but it's important to understand the risks. Key risks include bad locations, negative cash flows, high vacancies, and problematic tenants.
Is buying a house a trap? ›
Owning a home has a way of sucking up a huge percentage of your valuable income, especially if you've bought more house than you can afford. Yes, you are building equity in your home, but cash that goes into your home is very difficult to take back out.
