Grant Cardone's idea of "Never buy just one door"

[Ronald Wallis]

Good day all,

I have been educating myself to exhaustion lately about Real Estate, mainly reading, listening and watching Grant Cardone. One of his biggest statements is he is 100% against buying just 1 door. His reasoning is that its too big of a headache for the return. Any feedback would be appreciated. 

Cheers. 

[Mike H.]

I heard that podcast as well. And here's my main issue with it. He's out there raising money from other people to buy his apartment building deals. I'm sure he's not saying apts are the way to go just so he can raise money. But ultimately, his reasoning works because he already has access to a ton of money.

But he also seems to be suggesting that people are going to stop owning homes in the future so apartments are going to boom. Well, why is he saying that? Because he wants more people to kick in money so he can buy more properties.

But what I believe he's missing is that even if home ownership is in a decline, that does not mean more people are going to rent apartments. Thats just silly.  I don't see a bunch of families of four all of a sudden thinking that they would rather their kids grow up living in apartments. They might not own. But if they decide ownership doesn't make sense, then I see them renting houses and not apartments. 

Even individuals. I think they're going to hit an age where they simply want a house. Even if its not buying a house, they're going to rent a house. I don't see a successful 30 or 35 year old wanting to be in an apartment with a bunch of 20 year olds - at least not the normal ones. :-)

Ultimately, here's the more practical reason why buying sfh's make way more sense than apt buildings - its the cost of entry. You can't buy an apt building (i.e. 5 or more doors) without putting down the 25 or 30% down payment. I think there might be a few ways to do it if you find the right seller (i.e. seller financing). But in general, you have to have a pretty good size chunk of money to get in apts. 

A 600k 8 plex is going to require you to put down 150k!  I would think that if someone actually had 150k in cash sitting around they would be a little less likely to want to buy an 8 plex and deal with tenants. :-)

Now single family, on the other hand, allows you to leverage your capital and gain equity using the BRRR strategy. And if you can gain some experience and find the right hard money lender, you can grow a portfolio with far less capital than you can with trying to do multifamily.

Hard money lender lends you 100% of the purchase price plus 100% of the rehab. You pay the points and closing costs (6 to 8k). Rehab, rent and refi and do it again. And maybe you end up with a really good deal here and there and get something at say 65% of the ARV. When you refi, you do cash out and grab 10k to 15k back to help offset that out of pocket

Thats exactly what I've done over the last 9 or 10 years and I now own 66 houses (soon to be 68). I started with a 43k heloc and that was it. No flipping to feed my capital. I cashed out 50k+ from a 401k. And I have done some cash out refi's on a few of my houses over the years to continue the growth (the 6k to 8k out of pocket adds up fast).

But there is no way I could have even started to invest if I needed 150k as a down payment. So while the GC statement sounds interesting, I would also suggest that an individual's circumstances dictates more of what they can and can't do.

I would also suggest that most of us will need to keep their full time jobs too. Self managing an 8 or a 15 or heaven forbid a 24 unit takes way more work than having 24 sfh's. I'm self managing 66 homes with a full time job. I don't do any repair work myself. But I'm pretty sure I can do another 25 or 30 myself and still manage.

But based on the stuff some of my friends deal with, I know there's no way I could deal with 30 doors in multifamily. Just a far different type of tenant there. And because you're dealing with shared walls, you have something to deal with that us sfh landlords don't - tenant/tenant drama.

Grant Cardone's strategy works great for Grand Cardone. But unless someone has access to the kind of capital he has (either their own or the use of OPM), I just don't think his strategy is even remotely logical for the majority of investors that are getting into the business.

And not only is it about the startup but about the end result too. Not everyone wants to have a bazillion dollars. Some people want to add 3 or 4 houses. Let them pay themselves off in 20 years and then have 4 to 5k in net income to supplement their retirement. SFHs are just much easier to deal with for the majority of us.