Grant Cardone is an investor and author who popularized the “10X Rule” of financial freedom. Although he has a net worth of over $600 million today, he started from humble beginnings.
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Here are eight strategies Cardone used to turn just a few thousand dollars into a fortune.
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Invest in Real Estate
In a popular video on his YouTube channel, Cardone’s first piece of advice is that you have to start investing in real estate. He says this is the only investment he’s ever made that’s allowed him to turn $3,000 into billions.
Real estate prices have consistently gone up over time. That’s why Cardone and other experts like Barbara Corcoran have focused on it almost exclusively as they built their initial fortunes.
However, not all real estate investments are equally lucrative. Cardone will only buy properties that fit the careful criteria he’s established over his 20+ year career in the industry. The remaining points in this article cover Cardone’s unique approach to real estate.
Look for Big Deals
One of Cardone’s most foundational ideas is that you have to think big when investing in real estate. He says you shouldn’t let factors like a lack of capital or a poor credit score stop you from pursuing multimillion-dollar deals.
Like all obstacles, there are ways to overcome problems like a poor credit score. From Cardone’s perspective, it’s just a matter of finding the right solution and pursuing it with everything you have.
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You Have To Start Now
Next, Cardone says there’s no reason to delay making your first foray into the real estate market. He says he only found success when he “got committed, made a goal and stuck with it.”
He needed the support of partners and investors when he started buying his first large properties. But he went out and got those things for himself instead of waiting for them to come to him, as so many do.
Focus on Multi-Unit Properties
Cardone started his real estate journey by looking at single-family homes. However, he quickly saw that the money wasn’t in these properties — it was in multi-unit buildings.
Over the years, Cardone has decided he’ll only buy properties with at least 32 units. He also looks for buildings in areas that have positive migration. So instead of purchasing a single-family home in your region, you may need to look at larger properties outside of it to reach the same level of success that Cardone has had.
Know What To Avoid
Cardone has developed a specific set of criteria he looks for in any investment property he may purchase. He says some of those rules came from simply understanding what he didn’t want in a real estate deal.
For example, Cardone realized early in his career that he didn’t want to buy small properties. He says it’s easier to get loans for these deals, but occupancy rates are a huge problem.
If you have two units and one person moves out, you have a 50% vacancy rate and negative cash flow. But if you have 10 units and one person moves out, your vacancy rate is only 10%, which is much easier to manage from a cash flow perspective.
Cardone also says small units don’t pay you enough to hire a property manager who can oversee them. This leads to a scenario where each property you buy becomes more work for you.
Look for Investing Partners
Perhaps Cardone’s most important strategy is investing in real estate with partners. This is how he managed to turn $3,000 into a very high net worth.
With partners, Cardone doesn’t have to come up with all of the upfront capital needed for a deal on his own. He can put in as little as a few thousand dollars and end up owning a stake in a massive apartment building with hundreds of units.
The key is attracting wealthy partners to the deals that you’re considering. Having connections makes that much easier to do. However, you don’t necessarily need them. You just need to get in meetings with the right people and show them a detailed investment strategy that can give them great returns.
This process becomes easier once you’ve established your efficacy as a real estate investor. When you can show someone that you’ve made money for your investors in the past, they may be more likely to join your next deal.
Debt Is OK
Cardone says he always uses debt to finance his group’s real estate purchases. However, he’s careful to avoid over-leveraging himself. He says, “Putting too much leverage on a property will always result in problems.”
That’s why Cardone tries to keep his debt leverage around 65%. This allows him to take advantage of bigger deals without putting his capital at serious risk in the event of a market correction. Cardone says thanks to this strategy, he’s never lost a property, even when his peers lost everything in the 2010 housing market collapse.
Get Paid To Buy
Finally, Cardone says his ultimate goal in every real estate deal is getting paid to purchase the property. He means that he looks for buildings that will be cashflow positive — not just appreciate in value over time.
For example, you could buy a duplex and find renters who cover your mortgage. But you may not earn any extra cash until you sell the property in the future. Cardone prefers properties that put money in his pocket every month by having space for enough renters to surpass his mortgage payment.
Final Take
It’s hard to argue with Cardone’s results. His aggressive real estate strategy has helped him build a massive net worth without needing much upfront capital when starting.
However, it’s important to recognize the risks in Cardone’s philosophy, too. If you try to pursue very large deals too quickly, you could find yourself over-leveraging and, ultimately, losing the property to your creditors. As with all things, balance is key.
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Sources
GrantCardone.com, “Turn $3000 Into Billions in Real Estate“
This article originally appeared on GOBankingRates.com: Grant Cardone Shares 8 Ways He Grew $3K to $2.2 Billion
