Grant Cardone, private equity fund manager and real estate investor, has always viewed real estate as an incredible wealth-building tool. But he believes that 2024, in particular, offers big opportunities for those who want to make money through real estate investments.
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Here’s why real estate investing is Cardone’s No. 1 way to build wealth this year.
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The Current Real Estate Correction Allows You To Buy for Less Than the Cost To Build
When determining whether a piece of real estate is a good investment, it’s important to take replacement costs into account — the cost it would take to build the property as new. Cardone — who will be hosting his Real Estate Summit 2024 in Hallandale Beach, Florida in March — said that in the current market, you can often buy for significantly less than the replacement cost.
“For instance, we just bought a deal in Tampa for $225,000 a door and if you were to build that today, it would cost at least $350,000,” he told GOBankingRates.
This lower cost doesn’t even take into account the time and money saved by buying the existing property.
“If you started building today, it wouldn’t be approved until next year, which is 2025, and it wouldn’t be completed until probably 2027,” Cardone said. “That replacement cost of $350,000 would be if we started building today, not if we started building three years from now. So not only are we under replacement costs, but if you believe the cost of goods, supplies and labor [will] continue to go up, [then you’re saving even more].”
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Cardone explained that there are many rental properties available right now for under replacement costs due to the current correction in the real estate market.
“If Americans want to tap into the real wealth in this country, they have to get away from buying single-family homes and shift into this other asset class, which is apartments,” he said. “If this was 2008, the opportunity would be single-family homes. But it’s 2024 and the correction is in apartments and offices. Americans should be looking for loans that are maturing this year on complexes that are 40 units or bigger. And then they should put a group together to finance that asset and they will get rich beyond their wildest imagination.”
Rents Will Soar in 2 Years
Cardone loves rental properties as investments because they create an immediate cash flow — and he expects that cash flow to skyrocket in the next two years as rent prices dramatically increase.
“As long as the [average] mortgage is double the [average] rent, the rents are going to go up,” Cardone said. “The average mortgage is about $3,800. The average rent is only $1,800. Rents are going to explode because mortgages are unaffordable.”
In addition, rents will increase due to a shortage of rental units, he said.
“Two-thirds of all the apartments being built in this country right now will be completed this year, and then the next third will be finished next year — and [then] it’s over,” Cardone said. “There won’t be any more construction in this country, which will create a massive problem in ’27, ’28 because there won’t just be a shortage of homes, there’s going to be a shortage of rentals, too.”
Finally, as demand increases in areas where rents are currently affordable, rents in those areas will dramatically increase.
“The average rent in Florida is about $1,900 — [in] San Francisco, it’s $5,700,” Cardone said. “So rents in Texas, Florida, Alabama, the Carolinas, the whole Southeast are going to go up. They’re going to be flat for two years, and then they’re going to explode.”
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This article originally appeared on GOBankingRates.com: Grant Cardone: Why Real Estate Is My Favorite Wealth-Building Investment for 2024
