Grant Cardone: This Is the No. 1 Mistake To Avoid When Investing in Real Estate
Written by
Gabrielle Olya
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Ashleigh Ray
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Grant Cardone, the fund manager and CEO of Cardone Capital and Cardone Training Technologies, believes that real estate is the best investment to make — but that doesn’t mean that all real estate investments are good ones.
If you’re looking to make a successful real estate investment, Cardone said to avoid this one common mistake buyers often make.
Cardone: ‘Most People Are Buying the Wrong Kind of Real Estate’
The No. 1 mistake people make when investing in real estate is buying the wrong asset class, said Cardone, who will be hosting his 2024 Real Estate Summit in Miami on Oct. 14-15.
“They think all real estate is identical,” he told GOBankingRates. “They think a single-family home is like a four-unit or 10-unit apartment building.
“They’re not the same. Most people are buying the wrong kind of real estate. They’re buying something to live in, rather than something that will pay them money.”
Why Buying a Single-Family Home Is a Bad Investment
Buying a single-family home may make the most sense for you financially, but Cardone said this shouldn’t automatically be thought of as an “investment.”
“A house doesn’t pay you, [so] a house is not an investment,” he said. “Paying for where you live is simply that — paying for where you live. A car is not an investment — a car is an expense. An address is an expense. Do you need a place to live? Yes, but you don’t have to call it an investment. An investment pays you.”
While an investment pays you money, owning a home costs you money.
“You have to pay to keep it,” Cardone said. “A pure investment would [be] I buy gold, hold the gold and one day sell it and get my money. I don’t keep paying to keep the gold.”
Unlike gold, holding onto a house ends up costing you more money over time as taxes and home insurance costs increase, he added.
“People need to look at the cost of the house, not just the mortgage,” Cardone said. “Nationwide, the mortgage is double the rent today. That’s before the HOA fee, before the property taxes, before the [private mortgage insurance] (PMI), before the maintenance and before the interest on the loan, which could be 7%.”
One More Common Mistake To Avoid
In addition to buying single-family homes, Cardone cautioned against another common mistake real estate investors make.
“The biggest mistake is people buy a house thinking that they’re buying a real estate [investment],” Cardone said. “No. 2, they should not look for the lowest price — they should look for the best location.”
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