Grant Cardone says buying a home is a ‘terrible investment’ — uses Elon Musk and Warren Buffett’s unique housing situations to make his point. But would the billionaire investors agree? - Yahoo Finance | Canada News Media
Grant Cardone says buying a home is a ‘terrible investment’ — uses Elon Musk and Warren Buffett’s unique housing situations to make his point. But would the billionaire investors agree? – Yahoo Finance
Real estate investor Grant Cardone has once again taken a swipe at homeownership — one of the cornerstones of the American dream — calling it a “fantasy,” a “trap” and a “terrible investment” in an interview with Moneywise.
His comments followed a controversial Instagram post — that he claims to have gotten “a lot of hate” for — where he wrote: “Buying a home without a doubt is the WORST investment people can make, yet it’s also the most common one.”
Don’t miss
What’s behind the multi-family real estate investor’s home-investment vendetta? He says: “A house is never going to pay you. You’re going to pay the house and keep paying the house” — adding that the four walls of your family home are never going to make you rich. To reiterate his argument, Cardone points to some of the world’s wealthiest people.
“If you look at Elon [Musk] … or Warren Buffett and ask them how they got wealthy, none of them mention their house,” he says. “Elon doesn’t even own a home today [and] Warren owns one home.”
This is a somewhat skewed view, given that Musk and Buffett are two of the wealthiest people on the planet, who made their riches through business enterprises and investments. For them, a house is a small purchase — but for the average American, it could be the biggest investment you make in your life. Here’s where they all stand on homeownership.
Cardone says a home is ‘not a good investment’
In Cardone’s opinion, “under no scenario” would a home investment outperform investing in the S&P 500 or in gold, cryptocurrencies or even his wheelhouse of commercial real estate.
However, it’s important to remember that such blanket statements on investing should be taken with a grain of salt as the performance of any asset — whether real estate or traditional stocks and bonds — depends heavily on market conditions, the price at which you buy and sell, the timing of your investment and many other factors.
It’s also worth taking the advice of these gurus and experts with caution in general — but especially when they’re promoting specific products. Cardone has been the subject of litigation in recent years over allegations of misleading investors and followers while promoting products that ultimately fell short of the promised returns. He has denied the allegations, saying on LinkedIn it’s a “tragedy our system is so litigious and people are encouraged to sue others in order to hold a company doing great things hostage.”
Cardone calls out people who think buying a home for $100,000, living in it for 20 years and then selling it for $200,000 is a financial success story.
“You forgot about the property taxes [you paid] for 20 years,” he says. “You forgot about the interest rate of 7% for 20 years. You forgot about the maintenance, the upkeep, the problems, the situations, and the fact that you lost your mobility for those 20 years.”
The real estate mogul says he regrets buying a house, aged 28, with a 30-year mortgage — because his dad and “some financial planners said [he] should own [his] own home.”
“It’s crazy! I wouldn’t take a loan to grow my business, to grow my marketing, to hire employees, to buy machinery [or] to expand my brand. I would not borrow money to do that — [despite] knowing it will produce income,” he says. “But I borrowed money — [and] not a short-term loan — to own a house.”
He points out homeownership had no impact on his ability to build a business and create wealth — instead, he sees it as a financial “trap.” But would Buffett and Musk agree?
Buffett, aged 92, has lived in the same modest home in central Omaha, Nebraska, for 65 years. He paid $31,500 for the five-bedroom family home in 1958, which is around $329,194 in today’s dollars.
To Cardone’s point, Buffett didn’t generate enormous wealth through his house — and yes, he does have a lot of “money in investment vehicles that can pay him,” as Cardone put it.
Currently the sixth richest person in the world — with an estimated net worth of around $118 billion, according to the Bloomberg Billionaires Index — Buffett made his billions through his multinational conglomerate company Berkshire Hathaway (NYSE:BKR.B) and his long-term investments in companies like Apple (NYSE:AAPL), Bank of America Corp (NASDAQ:BAC), Chevron (NYSE:CVX), The Coca-Cola Company (NYSE:KO), and American Express Company (NYSE:AXP).
But that’s not to say the home he bought 65 years ago wasn’t a good investment. In fact, unlike Cardone’s position of regret, the so-called Oracle of Omaha still describes his home as one of his best investments.
According to Zillow estimates, the property — which is just a five-minute drive from Berkshire Hathaway’s corporate headquarters — is currently valued at about $1.2 million. But for Buffett, the home’s value stretches beyond the dollar signs.
In his 2010 letter to Berkshire Hathaway shareholders, Buffett wrote: “All things considered, the third best investment I ever made was the purchase of my home, though I would have made far more money had I instead rented and used the purchase money to buy stocks. (The two best investments were wedding rings.) For the $31,500 I paid for our house, my family and I gained 52 years of terrific memories with more to come.”
‘Will own no house’ — Elon Musk
Musk — currently the richest man on the planet, with a net worth of $258.3 billion — is an interesting case when it comes to homeownership.
Like Buffett, he reportedly lives a very minimalist lifestyle — to the extent that he famously tweeted in May 2020: “I am selling almost all physical possessions. Will own no house.”
He then started offloading his sizable real estate portfolio — which consisted of at least seven houses worth a combined $100 million, including six mansions in Bel Air — and he moved into a tiny rental home worth $50,000 in Boca Chica, Texas, where SpaceX’s development and testing site is located.
At the time, Business Insider reported some speculation that Musk sold his properties in the Golden State and moved to Texas to avoid a massive tax liability (of 23.8% by the IRS and an additional 13.3% by the state of California) after the sale of 10% of his Tesla shares.
He confirmed his housing situation in a 2022 interview with the non-profit organization TED, known for its popular TED Talks. “I don’t even own a home right now,” he said. “I’m literally staying at friends’ places. If I travel to the Bay Area, which is where most of Tesla engineering is, I basically rotate through friends’ spare bedrooms.”
Regardless of why he sold his property portfolio, Musk clearly views his business interests as his most important assets. He uses his billions to invest in companies that he either started or controls. For instance, he currently owns a 12.95% stake in the electric vehicle maker Tesla (NASDAQ:TSLA) — with his shares valued at just under $90 billion. He also invests in cryptocurrencies — with his favorite digital assets reportedly being Dogecoin (CCC:DOGE-USD) and Bitcoin (CCC:BTC-USD).
But most of Musk’s wealth is tied up in private enterprises like SpaceX, tunnel engineering company The Boring Company, neurotechnology start-up Neuralink and the social media platform X (formerly known as Twitter).
Cardone claims to take a similar approach with his business enterprises. He told Moneywise: “It’s simple for me. I own a number of businesses [and] I basically reinvest in all my companies.” And any money that’s leftover, he then invests it in multifamily real estate.
What to read next
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
