Today I saw a video that catched my attention. It is a video posted about two weeks ago by Business Insider. Grant Cardone says that buying a house is for suckers, here is the video: https://www.facebook.com/businessinsider/videos/10153805324464071/?pnref=story .
The point that Cardone is trying to make is that "buying a house to live in is for suckers". As a good philosopher I must say that it depends. Why it depends? It depends on your life style and the cash flow you have.
If you Google "Grant Cardone", you will see that he is a person that constantly changes of city and work. He is talking to people like him, that like to migrate from one place to another, that love change, that are flexible with changes and that might want to invest. He has written several books about investment.
With all respect to Mr. Cardone, I feel his point is way too radical and personal. I'm not saying that it doesn't work, because he has about $350 million real estate portfolio (I would like to find a client like him for investments). I consider him a little bit radical in the sense that not everyone likes to be skipping from one place to the other. Here are some details that he forgets to say the costs of moving and searching.
Monetary costs:
- Every time you move, you need to pay. You need to pay a moving company to move your furniture and personal things from one place to another. Also it is stressful to be on top of them in order to take care of your furniture.
- A new deposit at the place you go to rent.
- If you have pets, you need to pay the pet fees and a deposit.
- You need to pay application fees to some places.
- New insurance that might go up.
- Decoration costs if you need it for the new place.
- Paying to leave the property in good paint and clean conditions when you leave.
Intangible costs (time):
- You need to invest time in finding the adequate place. Adequate, meaning that your furniture fits, your displacement time from work to this new place is fine, you like the house or condo and the amenities, the price is in your range. It takes time to find a place.
- You need to notify all places that your address is being changed, it takes time to notify every place.
- You need to make time to organize your new place, if not you need to pay someone to decorate it.
- The stress of moving.
At the end he says you should to buy property to rent. In order to do so, you need to have enough money to pay rent and a loan, not everyone has that kind of money. I feel he is a little bit contradictory because just talking about taxes, it is better to have something as your homestead than as an investment. At least here in Miami you have more incentives to have a property of your own, than an investment property, you pay less taxes and have more protection against trials.
If you see that your investment pays for itself and leaves enough money for you to rent and save, that is a good deal and I would do it. All is about numbers! The problem with this point is that most young people are renting because they are carrying a debt from their college studies. That is why he feels it is good to invest in renting properties (for the one that has the investment money), but they need to be in the right price range for this market.
All people should have investment properties in order to gain more money through equity. I feel the video a little bit vague because almost everyone needs a loan to buy an investment property. Not everyone has the cash flow to buy cash. The rent can help you pay the loan and sell when you have reached the highest peak. You can make higher payments and cancel the loan in less time if you want (you need to check there is no prepayment penalty). Also with investments you calculate the yearly return percentage, it is better to get the net percentage after all costs in order for you to see how good is the investment.
I think that if you buy a property for your home and you want or need to move, you sell it or rent it. It is an investment you are doing to live in it or to get some profit from it. If you rent where you live and own where others rent you will need to get a loan in any case and pay more taxes on investment properties. With an investment property sometimes it takes time to rent or sell, you need someone to manage it (if you are away), in both cases you need to give maintenance to the places, and sometimes you get good tenants or bad ones. All positions have their pros and cons.
I think that Cardone is talking about people that are at his same level or want to start investing. If you buy multi-family buildings you can buy a cheap property that gives you several rents. If he is focused on this point, I get it, you gain a fast return. In order to do so, you need information that helps you see which places are good for renting. It is better to receive several rents, than one, you get more money and if one tenant leaves you have the other rents to help you. With more money you can pay the loan faster or invest it to gain more money. If any one is interested over this point I could give you more tips and places where to invest. I believe that this is a very valuable point not mentioned in the video.
People who have a lot of money get bored easily. Rich people love modern properties and can afford them. In that case, I understand why you would prefer to change from one place to another because you have the ability to and the money. In the case of most of us, that has another meaning. Either you buy a house or condo to live or for investment, you are NOT A SUCKER! I don't agree with Mr. Cardone's point of view, but I understand his point of view! Receive a faster return if the investment is done right and you are not tied to make payments for 30 years for a property to live in, that is his point, but some people need to own a HOME and there are good deals too.
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