Financial Fiction Friday #11

Don't Buy a Home, Buy Someone Else a Home

Grant Cardone is at it again.  Despite being an actual coward* when faced with legal challenges to his bad advice and poor treatment of investors, he still pumps out contradictory financial advice with no logical basis.  

In the very first paragraph of this article, he lays out his thesis that buying a home is not a good investment.  Later he explains why: Costs can eat into "profits", there isn't any cash flow, and tax deductions are limited.  

All of those are true...but miss the point of a home which is to live in it.  Not everyone can just live on their private jet, Grant.  The implication is that people should forgo purchasing a home for themselves and instead purchase an investment property that can earn income and be used for tax-beneficial depreciation.  However, this is bad financial advice for the same reason an investment property can be a good investment: Rent goes up.  

The alternative to owning your home is to rent it. Renting often proves to be substantially worse long-term.  As we are seeing now, rent inflation is a massive problem for renters.  Seeing your rent rise 20-100% is far worse than spending a few thousand dollars on yearly maintenance costs or only deducting your mortgage interest.  You risk your own rent rising faster than your properties' rent which may not be a problem when you own multiple, but can be a huge problem when you are leveraged on a single property because Grant Cardone told you to.  

Obviously, Grant is in the business of promoting his own real estate funds and highlights the benefits of real estate investing but this goes beyond that.  This is a freezing cold take and completely divorced from reality.

*Cardone himself doesn't even believe his own rhetoric.  He has admitted his online persona and advice is nonsense, explaining in response to the class action lawsuit that his statements are "puffery" and can't be relied upon by investors.  

All Fiction