Borrow Cash To Invest In Real Estate? Here’s What Grant Cardone Says
Written by
Jordan Rosenfeld
Edited by
Molly Sullivan
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If you’ve held off on investing in real estate because you don’t have the money to sink into it, finance expert Grant Cardone suggests that a lack of cash doesn’t have to hold you back. Instead, you can borrow what you need to invest in real estate.
He doesn’t mean borrowing in the form of bank loans, either, which he shies away from, but rather borrowing from anyone who might be willing to invest in you and your real estate ventures.
Real Estate Is a Partnership Game
Cardone went so far as to tell people not to buy real estate with mostly their own money: “Real estate is a partnership game. You’re going to have a lender that will be your major partner.”
That partner, be it a bank or an investor, should provide up to 65% to 75% of the deal.
“You’re going to have problems if you don’t get investors,” he said.
While you will have to put up the remaining 25% to 35% with your own money, that could turn out to be a lot less than you think.
Cardone Practices What He Preaches
Cardone can speak from personal experience when giving this advice, as his first big real estate deal was possible due to support from friends and family.
“I started with no money,” he said, explaining that he made his first deal with just $3,000, his second deal with no money and his third deal with $350,000 down.
“[A]nd I raised most of the $350,000 from people I knew that did not want to be invested in real estate, but they were willing to give me a short-term loan,” he said.
Cardone turned those early successes into a thriving real estate investment company, and that business, Cardone Capital, today holds more than 12,000 apartment units across 37 multifamily properties and over 500,000 square feet of commercial office space, according to its website. All that real estate has an incredible value too, around $4.3 billion in assets.
And Cardone has had extraordinarily good success borrowing from investors: “Out of 13,000 people, I’ve had problems with three investors. It’s allowed me to build a multibillion-dollar real estate portfolio that I could not have done without the investors.”
Additionally, it’s allowed him to avoid taking loans from banks, which he’s leery of, given recent sizable bank failures.
Real Estate Without Responsibility
Real estate is worth borrowing money to invest in, Cardone suggested, especially for those who want to reap the financial rewards but are not interested in the responsibility of being a landlord or managing properties.
“They want to be in real estate — the doctor, the lawyer, your dad, your mom, your brother, your sister — but they don’t want to collect the rents, they don’t want to handle the tenants, they don’t want to do the toilets, they don’t want to handle termites,” he said.
All that said, it’s still wise to be thoughtful and careful. Anytime you’re mixing personal relationships and money you run the risk of putting stress on those relationships, particularly if things don’t go the way they hope.
Get It in Writing
Whatever agreements you come to in borrowing money, always get it in writing with clear terms. Do not rely upon handshake agreements, even if you think you trust the investor. People’s financial situations, and expectations, can change. Better not to leave it to chance.
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