Grant Cardone, an esteemed real estate investment guru, recently made headlines when he declared homeownership as "the WORST investment people can make." A notion seemingly contradictory to the quintessential American Dream, his assertion certainly demands a closer look.
While it's true that homeownership comes with its fair share of costs—broker fees, maintenance, property taxes, and mortgage interest—Cardone's calculation seems to overlook the broader picture. Let's take his example of a $576,000 home held for 10 years, culminating in a total cost of $1,221,120.
But what about the value appreciation over that decade? According to Zillow, U.S. homes appreciated on average around 4.1% annually from 1991 to 2019. If we apply this to the $576,000 house, in 10 years, it would be worth around $849,000—a substantial gain.
Moreover, Cardone's argument doesn't consider the intangible benefits of homeownership, such as the sense of stability, community, and the freedom to personalize one's living space.
Cardone suggests investing the down payment in real estate that generates passive income, like residential REITs or crowdfunding platforms. While these are indeed lucrative opportunities, they come with their own set of risks. For instance, REITs are subject to market volatility, and crowdfunding platforms can suffer if a property fails to perform as expected.
Cardone's perspective, though valuable, shouldn't be the only consideration when evaluating homeownership. His argument primarily focuses on financial outcomes, neglecting the socio-emotional benefits of owning a home. Each individual should consider their unique situation, financial goals, and personal values before making such a significant decision.
Looked at from the lens of wealth creation, diversifying investments into a portfolio that includes real estate, and investment vehicles is an even better long-term strategy.
According to the Pew Research Center, Latino households lost 66 percent of their wealth from 2005-2009. At that time most Latino wealth was primarily in real estate. The result was devastating for many Latino families.
Homeownership isn't the "worst" investment and there is not only one way to achieve the new version of the American Dream. It's one piece of a diversified financial portfolio and a possible path to building long-term wealth. As always, it is essential to do thorough research, consider multiple perspectives, and perhaps consult with a financial advisor before making any major investment decisions.
For more insights into homeownership and other wealth-building strategies, check out resources like the Hispanic Wealth Project
or blogs and podcasts like Gary Acosta's
for a balanced perspective on wealth creation, which can be particularly useful for those grappling with the idea of homeownership.