Grant Cardone Forecasts Tenfold Returns As Homebuying-Renting Gap Hits 50-Year High
With the gap between the cost to buy a home versus renting at its highest in 50 years, real estate mogul Grant Cardone predicts his investors will see a return on their investments in his company's real estate portfolio over the next 10 years.
Cardone shared a graphic from Visual Capitalist illustrating how rising mortgage rates and home prices have impacted the housing market.
In October 1981, during the peak of homebuying for the oldest baby boomers, the 30-year fixed-rate mortgage hit a record high of 18.63%. At that time, the monthly cost to purchase a home was $875 per month and renting cost was $365 per month, according to the Visual Capitalist chart.
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During the 2006 housing bubble, those numbers spiked, with rental costs nearly tripling to $1,056 per month. The monthly cost to buy rose to $1,518 but was far from the percentage increase renters experienced.
In 2021, home values spiked as millennials entered prime homebuying age at a time when mortgage rates were historically low. The cost to rent shot up to $2,697 per month while rental prices increased to $1,634.
Cardone predicts rents will average $2,800 per month by 2034.
"This would increase the value of Cardone Capital portfolio by double," Cardone wrote in a May 1 post on X. "If I'm right, this will provide an 8%-10% cash flow to our investors and 2X-3X return on capital investment."
That was little comfort to some of Cardone's followers, with one posting, "If things keep going the way they're going, the government will force you to let people stay without paying rent for the next pandemic until the bank forecloses on your properties. Then BlackRock will buy up a lot, and there won't be any private ownership after that."
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Another was skeptical of Cardone's prediction, writing, "In my experience, it's never going to happen. Rents will be forced to come down by the people unless wages considerably rise."
Cardone Capital, which owns 15,000 rental units, has distributed more than $300 million in cash and another $1 billion in depreciation, reducing its investors' taxes.
Renting is the more cost-effective housing option in most major U.S. cities, according to a recent analysis from Bankrate. A typical home costs about 37% more to buy than to rent on a monthly basis while rent increases have softened.
"Purchasing a home is a long-time commitment," Zillow Chief Economist Skylar Olsen told Bankrate. "Home price appreciation has slowed considerably, and costs have risen dramatically since the days of 3% mortgage rates, so it's going to take more time to break even on a purchase compared to renting."
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