Real Estate Rules for Beginners

Release date: December 1, 2021
Duration: 75min
Guest(s): Grant Cardone
Grant Cardone

Today, Grant Cardone, CEO of Cardone Capital, joins Robert and Kim Kiyosaki on The Rich Dad Radio Show to discuss real estate. Grant is a national speaker, an entrepreneur, and a real estate investor for twenty-five years.

“All I keep hearing is, ‘Oh, the price of real estate is so expensive,” Kim says. Grant says that he believes we are in a supercycle that has never, ever, happened before in our lifetimes. Grant says he thinks this country (the U.S.) will become a renter nation. He doesn’t believe real estate is overpriced today, either. “Cap rates will compress to 50% of what they are today and I think that people are underestimating the three trillion, four trillion that’s been printed.” If you look at the amount of money that’s been printed, compare that to the amount of appreciation of real values in real estate, the property values have not kept up with the printing press.

“We have a long way to go before we are in any kind of bubble territory.”---Grant Cardone

People, he says, that are buying real estate today are completely different than back in 2010. These are wealthy people buying second and third homes. Not first-time buyers. People are either paying cash or putting up to 50% down. Then you have investors who are buying real estate from end-users. There are 25 offers of a single-family home, for example, and everything is going over the asking price. The guy that gets the deal is typically an investor who is going to Airbnb the property, Grant says.

Robert notes that some of what is driving the real estate market is the migration of people from cities such as San Fransisco, and other high rent cities with overwhelming homeless populations.

Kim agrees and says she was surprised to learn that when they went to sell their Portland rental property (due to the vast number of homeless and riots), that their property was actually in a very hot market. “People are moving into Portland, but people are buying and moving up,” she says. They sold the property, unlisted, and after raising the asking price.

Grant says that is why he’s been selective about where they are buying.

“We are buying mostly in blue states.”--Grant Cardone

They have bought in Austin, TX, although he admits he’s been wrong about Austin many times before. “You can’t get any more expensive.” But it’s going to, he says, because we don’t understand the amount of money and people moving to the places that protect them from what they’re leaving.

“The more mandates they put out, the more crazy politics that people make, the more they pressure landlords, the more eviction moratoriums they do, is pushing people out of New York, New Jersey, California, Oregon.”

Anywhere that politics are crazy, regardless of which side you are on, he says, is where people are moving from. If they are not protecting the money and the people investing money, that money will move. And it’s moving to Arizona, Utah, Nevada, Florida, the Carolinas. Texas is on fire, he says.

Kim and Robert relate that many people ask for advice on how to buy real estate if they don’t have any money. “You are supposed to use other people's money,” Robert says. For Grant, he says he only ever used the bank's money. For twenty years, Grant has been buying multi-family units, using his other businesses to fund the first purchases. About five years ago, he opened it up to allow people that follow him to invest with him, alongside him. “We raised $6 million for a deal in about 60 minutes,” Grant says.

He’s not going to family, or to wealthy people, or getting funds from Blackstone. He’s getting money from people that need the opportunity and can’t buy these big deals.

“Most Americans get the leftovers in real estate; they get the single-family house that we call a ‘dream’ but in reality we know is a ‘liability’, not an asset.”--Grant Cardone

Most people trying to get into real estate get these small deals or even duplexes, but he says people should ‘skip the small stuff’ and go buy big deals. Even if you have to collaborate with somebody else to do it. Big deals always work better than the little deals. Multi-family is all about math. It’s not just one or two units.

Raising the money, Grant says, is the easy part. Managing the property and knowing how to manage it, is the hard work.

So, how do you get started in real estate right now?

According to Grant, going bigger is key, rather than small, one unit deals. While Robert disagrees, Grant says that even a 200 unit deal is a great start. “I would tell people the first thing they should do with real estate is invest in real estate to learn it. If you want to play the Bitcoin game, you go buy some Bitcoin first, then start learning about it. Too many people are learning and never actually making an investment.”

Robert says that most people just buy a mutual fund or a stock or a bond or an ETF. Paper assets, he says, are liquid. You make a mistake with them in the morning, you an be out of them by night. But with real estate that’s a bad deal, you might be in trouble if you make a mistake, and they are harder to get out of.

The most important thing in real estate is: how do you find it, how do you finance it, and how do you manage it?

Grant says go where the jobs are, and location is vital. Markets that have these factors are key; Austin, Houston, Scottsdale, Fort Lauderdale, Miami. These are pro-business states, positive job migration. “We pay a premium for our real estate to be in an area where our renter does not exceed 20% of their income.” Buying in really strong job bases with great locations is key. For Grant, he says they buy as big as they can and as nice as they can.

During COVID and the lockdowns, Grand says his rent collection at 98.9% on 95% occupancy exceeded what the news was reporting as a 72% collection. His collections went up, not down, and his renewals doubled because people couldn’t shop apartments during this time.

“It’s all about management, raising capital, and finding property.”--Grant Cardone

Grant Cardone is the best-selling author of The 10X Rule. You can find him at Grant Cardone - 10X Your Business, 10X Your Income, 10X Your Life