Homeownership Vs. Renting – Why Grant Cardone Thinks The American Dream Is a 'Terrible Investment'

While 94% of Americans view homeownership as a fundamental part of the American dream, real estate mogul Grant Cardone paints a different picture.

In a post on his YouTube channel, Cardone contends that the average mortgage payment is double the cost of rent, making homeownership a financially destructive decision, according to Moneywise.

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"No matter how much you guys complain about rent, it is still half of what it costs to live in that piece of sh$t house that you call the American dream," Cardone said in the YouTube video. "A house is a terrible investment."

Data from a Bankrate analysis of Redfin and Zillow supports Cardone's claim. The study reveals renting is consistently cheaper than buying in the 50 largest U.S. metropolitan areas.

Cardone advocates for an alternative approach: investing the difference between rent and mortgage payments in more lucrative assets. He suggests investing in stocks, cryptocurrency and rental properties.

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Here's why.

Stocks

Cardone argues that homeownership is a less profitable investment than the stock market. Historically, U.S. stocks have outperformed the housing market.

According to CEIC Data, the U.S. housing market has delivered an annualized return of 6.1% since 1992. The S&P 500 has yielded an average annualized return of 8.41% over the same period. The difference highlights the potential for greater financial gains through stock market investments.

Cardone says investing in S&P 500 index funds is more efficient for participating in the stock market's growth. By diversifying investments across various sectors, index funds offer a lower-cost and potentially higher-return alternative to traditional homeownership.

A home you live in doesn't generate income. Unlike stocks, which can pay dividends, a home occupied by the owner provides no rental income.

Cryptocurrency

Cardone contends that historically, most cryptocurrencies, including Bitcoin, would have outperformed the housing market. However, crypto is volatile and risky. While Bitcoin has seen impressive growth, many other cryptocurrencies, such as those associated with FTX, LUNA and Dogecoin, have experienced significant losses.

It is complex to compare real estate to cryptocurrency directly. While Bitcoin has demonstrated exceptional growth, the broader cryptocurrency market remains highly speculative and subject to rapid price fluctuations.

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Rental Properties

While Cardone may discourage traditional homeownership, he advocates for rental property investments. He credits a significant portion of his wealth to commercial real estate ventures.

Cardone argues that rental properties consistently outperform owner-occupied homes regarding financial returns. With an average gross rental yield of 6.1% across the U.S. in the third quarter, rental properties offer a steady income stream.

"A rental property will always make more money than a house will," Cardone said.

Investors can also explore various commercial real estate options, such as retail, data centers, malls and farmland, which may offer even higher yields.

Combining rental income with the power of leverage and potential property appreciation can generate substantial returns for long-term real estate investors.

You Can Profit From Real Estate Without Being A Landlord

Real estate is a great way to diversify your portfolio and earn high returns, but it can also be a big hassle. Luckily, there are other ways to tap into the power of real estate without owning property. Arrived Home's Private Credit Fund’s has historically paid an annualized dividend yield of 8.1%*, which provides access to a pool of short-term loans backed by residential real estate. The best part? Unlike other private credit funds, this one has a minimum investment of only $100. 

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Image via Wikimedia Commons