According to a LendingTree survey, a whopping 94% of Americans say owning a home is part of the American dream. Real estate magnate Grant Cardone believes this obsession with homeownership is financially destructive.
“No matter how much you complain about rent, it’s still half of what it costs to live in that shithouse you call the American dream,” Cardone says in a post on his YouTube channel. “A house is a terrible investment.”
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According to Bankrate’s analysis of housing data from Redfin and Zillow, it’s an average of 37% more expensive to buy a home than to rent on a monthly basis. Renting is cheaper than buying in all 50 of the country’s largest metropolitan areas.
Cardone’s thesis is that a typical family that rents their home instead of buying it can save the difference and invest in more productive assets. Here are his top tips.
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Cardone says American stocks have historically outperformed the real estate market, which is why he prefers investing in an index fund that tracks the S&P 500 rather than investing in a home.
According to CEIC Data, the U.S. housing market has delivered an annualized return of 6.6% from March 1992 to March 2024. For comparison, the S&P 500 delivered an average annualized return of about 8.41% from 1992 to 2024. In fact, stock investors have outperformed homeowners over the past 32 years.
It’s also worth noting that homeowners don’t generate cash flow. You can’t collect rent on a property you live in. The S&P 500, on the other hand, offers an annual dividend. If annual dividends from the index were reinvested, the annual return from 1992 to 2024 would be 10.24%.
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Cryptocurrency
“Every cryptocurrency” has historically outperformed the real estate market, Cardone said. “Except Dogecoin, and even Dogecoin could make some of the houses you buy look like shit.”
To be honest, comparing cryptocurrencies to real estate is not an easy task. According to Curvo, Bitcoin has achieved a compound annual growth rate of 100.68% over the past 12 years, measured in US dollars. However, other cryptocurrencies have not had a similar run. Several tokens associated with FTX, LUNA and Dogecoin have failed in recent years, wiping out investors’ capital.
In addition, unlike real estate, cryptocurrencies are subject to significant volatility, making them unsuitable for the average investor.
Rental properties
While you own a property, live in it may not be a good investment, but Cardone believes rental properties are a good investment. In fact, he has built much of his wealth by investing in commercial real estate.
“You can always make more money with a rental property than with a house,” he says.
According to GlobalPropertyGuide, the average gross yield from rental income in the US is 6.10% in the third quarter of 2024. Moreover, real estate investors are not limited to residential properties. Commercial properties such as retail stores, data centers, shopping malls, and farmland could offer higher returns.
Rental yields, combined with leverage and capital appreciation effects, could generate significant returns for long-term investors.
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This article is for informational purposes only and should not be construed as advice. It is provided without warranty of any kind.
