A whopping 94% of Americans say owning a home is part of the American dream, according to a survey by LendingTree. Real estate tycoon Grant Cardone believes this obsession with homeownership is financially destructive.
“No matter how much you guys complain about rent, it is still half of what it costs to live in that piece of s— house that 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 Redfin and Zillow housing data, on a typical monthly basis it’s 37% more expensive to buy a home than rent one. Renting is cheaper than buying in all 50 of the largest metros across the country.
Cardone’s thesis is that the typical family that rents instead of buying their home can save the difference and invest it in more productive assets. Here are his top picks.
Stocks
American stocks have historically outperformed the housing market, according to Cardone. Which is why he prefers an index fund that tracks the S&P 500 over a house as an investment.
The U.S. housing market has delivered an annualized return of 6.6% from March 1992 through March 2024, according to CEIC Data. By comparison, the S&P 500 returned about 8.41% on an average annualized basis from 1992 to 2024. Effectively, 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 that you occupy. Whereas the S&P 500 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
“Any cryptocurrency” would have outperformed the housing market historically, according to Cardone. “Except for Dogecoin and even Dogecoin could make some of the houses you guys buy look like s—.”
To be fair, comparing crypto to real estate isn’t exactly straightforward. Over the past 12 years, Bitcoin has delivered a 100.68% compounded annual growth rate when measured in U.S. dollars, according to Curvo. However, other cryptocurrencies haven’t had a similar run. Several tokens associated with FTX, LUNA and Dogecoin have failed in recent years, sinking investors’ capital.
Cryptocurrencies are also significantly volatile, unlike real estate, which makes them unsuitable for the average investor.
Rental properties
While owning a property to live in it may not be a good investment, Cardone certainly believes rental property is a good investment. In fact, much of his wealth was built on commercial real estate investments.
“A rental property will always make more money than a house will,” he says.
In the third quarter of 2024, the average gross rental yield across the U.S. is 6.10%, according to GlobalPropertyGuide. Also, real estate investors are not restricted to residential properties. Commercial real estate such as retail stores, data centers, malls and farmland could offer higher yields.
Rental yield combined with the impact of leverage and capital appreciation, could deliver sizable returns to long-term investors.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
