A look at Grant Cardone’s real estate portfolio and how he raised $15M in 90 minutes at Marlins Park
Cardone boasts an eccentric life on Instagram but his real estate investing is much more conservative
At Marlins Park on Super Bowl weekend in February, thousands of aspiring entrepreneurs watch as a black Rolls-Royce SUV with tinted windows roars onto the stage amid a cloud of smoke. Over the loudspeakers, the song “Nuthin’ but a “G” Thang” plays as Snoop Dogg steps out of the driver’s seat.
But his passenger is the real star of the day. Donning dark sunglasses along with a black sweatshirt with the words “10X” in gold lettering, the 60-year-old, gray-haired Grant Cardone walks alongside the rapper, singing to the lyrics into a microphone.
A speaker, author, business consultant and real estate investor, Cardone has amassed more than 2.4 million Instagram followers who look to him for advice on how to grow their businesses. In Miami, he held a three-day conference as part of his 10X Growth Tour — named for his goal to grow your business 10 times.
“The whole world knows about Miami, Marlins stadium and Grant Cardone putting 35,000 people for three days at that place during Super Bowl weekend,” Cardone said in an interview with The Real Deal.
Cardone’s social media posts portray him as a person of great wealth and success. In one Instagram post he boards a private plane with the caption, “You can’t get rich by acting poor.” In others, he’s traveling the world and meeting with celebrities such as boxer Floyd Mayweather. On his website, you can buy wristbands that say “Don’t Be a Little Bitch,” which to Cardone means: stop complaining about your problems.
The Louisiana native’s real estate company, however, is much less bombastic than his events or his lifestyle. Based in Aventura, Cardone Capital only buys apartments across the Southeast where rents average less than $1,500 per month, he said. The company paid about $90 million for the 346-unit Atlantic Delray Apartments in Delray Beach in October 2018. In July, the company bought a 501-unit apartment complex at 2903 Northwest 130th Avenue near Sawgrass Mills in Sunrise for an undisclosed price. In the first seven months of this year the firm completed almost $350 million in deals.
Cardone’s thesis is simple: The American dream of homeownership is dead, and everyone is going to move to apartments.
“You got 75 million millennials that don’t want to own anything. They wouldn’t own their tennis shoes if they could just lease them,” Cardone said.
He is now opening up his real estate investments to his social media followers who can invest in his fund with a minimum of $5,000. Cardone, who is speaking at The Real Deal’s 6th Annual Showcase & Forum on Oct. 17, talked to TRD about his investment strategy and how he got into real estate.
How did you get into real estate investing?
I will never forget it, it was 30 years ago. It was $78,000. I put $3,000 down and I bought a house, and I thought I was going to be a real estate mogul. I rented it to Janet and her sister, Jill. I think I was making $180 bucks a month. I said, ‘Oh man, I am going to get rich doing this.’ Then they moved out about five or six months after living there. Then I realized I was responsible for the payment of the house. Then I was like ‘Oh my gosh, I can’t do this.’ I was 28-years old, it was a single-family house in Houston, Texas.
I sold that house because I realized it was something that I didn’t know. I got my money back, sold the house to a guy who did know what he was doing. I spent the next three years studying apartments, which is the only thing that we focus on now, which is buying apartments. I did my first real apartment deal in San Diego, California. It was $1.9 million and it was 38 units. Then we were off to the races.
Why did you switch from single-family homes to apartments?
Real estate wasn’t my first business. I had two other companies and I was doing consulting for companies. But I always had a love affair for real estate. When I did the single-family home, frankly, I bought based off what money I had. I didn’t do a lot of research. I just did the easy thing. I got the loan with almost no money down. And I could buy the house and rent it to someone else.
So when they moved out, I realized there was something I don’t understand. There was a risk, there was a risk of having to pay a note. So I went and studied other super real estate investors like Sam Zell, Donald Bren and Fred Trump. What did these guys create? These guys, by the way, are not super genius people. I could relate to them, these are all kind of blue-collar people.
They all have one thing in common. They had scale. They have apartments, they all did affordable. So my next deal, it would be in three years. For those three years, every weekend I would shop real estate. I was in Houston at the time and I moved to San Diego. I would read deals and shop deals and bought my first deal in San Diego three years later.
What are the markets you would avoid?
California and New York. You couldn’t convince me to do a deal in California. It’s about who actually owns the real estate. They are so tenant-friendly that I can’t move a non-paying tenant out. And if I can’t move a bad tenant out, then I can’t take care of my property and all of my good tenants. You got other problems in both those places, you have water and trash problems. We are not ready to scale to those markets. Even if I wanted to, we are not ready to scale to those markets.
I like tax-free states. I like job migration. Neither one of those states, California and New York, have positive job migration. We are looking for a very affordable band of real estate. Our average rental is probably $1,100 to $1,300 [per month].
Where is tenant demand coming from for your properties in South Florida? Are people just getting priced out of single-family homes?
I think that people don’t even want single-family homes any more. I think the preferred way of living is going to be an apartment complex. The [D.R.] Hortons, the big homebuilders are building more apartments because they don’t want to say this publicly, but the American consumer is not inclined to buy a home today.
You got 75 million millennials that don’t want to own anything. They wouldn’t own their tennis shoes if they could just lease them. Then you have 80 million baby boomers who have already owned a home, [who] know it is not the American Dream.
You got half of the population who is interested in mobility rather than in home ownership. This will play out over the next decade or two. We bought the debt deal in Delray [Beach]. That swimming pool had to cost $2 million to build. Well, where could I get a $2 million swimming pool? The house would have to be $30 million to build a $2 million swimming pool.
Is there an oversaturation of upper Class A apartments in Miami?
I think there will end up being an oversupply. The real issue is that we don’t have income growth in America. I get concerned about all these places that are going up that support someone not at $2,200 [per month in rent] but at $4,000. I don’t know why we need all these $4,000-$4,500 per month apartments.
Are you buying in Miami right now?
We are buying, but we are very, very selective. You got to be careful right now.
Why are you careful?
You got to be really careful in location. That’s not just in Miami. In Houston, you have to be very careful on location. People should be preparing for a recession. I want to be recession-proof. I don’t want to be beat up. At the same time, I don’t want to wait for a recession to buy property.
Are you noticing any signs in the real estate market that a recession is imminent?
I wouldn’t look for a recession just in the real estate market. I would look for it in the everyday person. I am looking at what people can spend money on. If you look at the auto industry, the cars that sell best, there is a direct correlation between the subsidy offered by the manufacturer and how well that car sells.
The high-volume activity in the automobile sector is driven by subsidiaries, no money down, very low and no interest rates. You could say the same thing about the furniture industry, meaning people don’t have the down payment to make discretionary purchases.
What attracts you to invest in South Florida?
I left California, I moved here seven years ago. A lot of people are following me over since then. Now you got New York coming down here… I like our politics. I like that we don’t have a state income tax. I like the warmth. Older population prefers warm weather during the year. I just finished traveling, we did 19 countries in two months for the 10X tour. I’ve been to Singapore, Dubai, London, Malaysia, and Thailand. I’ve been to some beautiful places. Every time I fly back into Miami, I say, ‘Damn this place is beautiful.’ When other people come here, they see that… I am always looking at deals here as long as it is a cash-flow positive deal even in the face of a contraction.
How are you financing your real estate deals?
We raised about $250 million in the last 20 months using social media. I raised a quarter of a billion without using a family fund or an institution and without running ads and bringing anyone to dinner. This is a story by itself. $250 million, 20 months and our advertising spend is negligible. No fees, no brokers to raise the money. Its Instagram, Facebook and LinkedIn.
I buy the deals with my money. Once they are stable and cash flow positive, we then offer it on Instagram or Facebook or LinkedIn and say, ‘Hey you can invest in this with me.’ Rather than invest in family funds or go to traditional institutional lenders for equity, we use crowdfunding via social media.
The equity comes from me first. I write a check for the deal, I get traditional lending from Fannie [Mae] and Freddie [Mac] or a life insurance company, then I backfill the equity from my social media following which is shy of 20 million people worldwide.
What’s the minimum investment?
$5,000 for a non-accredited fund.
What are your expected returns?
We target transactions that we believe can deliver 15 percent annualized to the investors after expenses.
How did you get into motivational speaking?
I take offense to being called a motivational speaker. I am an educator. When I was 31 years old, I was helping companies increase their revenues. It started with small companies. Then a small company introduced me to a bigger company. Then I was introduced to Nissan Motor Company. I have been working with companies for 30 years on how to raise their revenue. It just so happens if people aren’t motivated about raising their revenues they probably won’t raise their money.
When did you start going overseas on these tours such as the 10X?
We started doing that about a year and a half ago when some people called. We put 35,000 people at the Miami event. Once we did that last February, the phone rang off the hook. More people were in the Marlins stadium that weekend than have ever been there for months at a time, by the way. The whole world knows about Miami, Marlins stadium and Grant Cardone putting 35,000 people for three days at that place during Super Bowl weekend. So, how ballsy is that?
We raised almost $15 million at that event in 90 minutes for our real estate.
What is the question that you get most commonly asked?
How do I grow a business? Guys in startups, a guy that is making a million dollars a year. I attract people that want to grow things. So, in real estate you are buying 30 units — how do I grow my portfolio?
You live in Sunny Isles Beach? Do you plan to stay there?
I got two kids, an eight-year-old and a 10-year-old, we own the office here, 25,000 square feet in Aventura. I would buy all the apartments in Aventura. It’s just impossible to move around here… People are going to choose renting over owning in the future. It’s going to become obvious to everyone.
Any other plans you have in the future?
In the next three years, I am going to raise $3 billion in cash to build a $10 billion real estate portfolio using social media. It’s never been done before. I am going to do it without paying agents and fees. No brokerages. About 25 percent of the money is coming from retirement accounts, self-directed 401Ks. Without any brokers involved, without any licensed agents.