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10 Rules to Live by to Succeed in Real Estate
Grant Cardone is someone I have looked up to for a long time, so it was incredibly exciting to have the chance to interview him recently for my podcast Below The Surface and the accompanying Drive By Dan video series.
Grant, known as ‘Mr 10X’, is many things – an internationally renowned business coach, the head of a billion-dollar real estate empire, a New York Times best-selling author and the creator of the 10X growth conference series.
But his personal story is just as fascinating as the incredible success he has achieved. He’s a passionate dude who believes getting ahead is a mindset. And he has the background to prove it.
Grant came from nothing and overcame a drug addiction and many struggles to launch himself into property in a big way.
I heard him speak at a conference in Brisbane and he agreed to come on my podcast. We jumped in my car and went for a drive to grab coffee and record our chat and it was inspiring to say the least.
Here are Grant’s 10 rules for success that he offered my lucky listeners:
1. Don’t let fear get in the way
Looking back on his professional life, Grant says that no matter how much money he was making, he was always a bit scared of it.
He was constantly fearful of money – of losing it, of second-guessing his ideas, of having too much, of not knowing what to do with it.
One of the biggest lessons he’s learnt is the incredible hold that fear has on you. It traps you. It blocks you from your full potential. Fear of failure is toxic, but Grant believes failing is harder than succeeding.
Grant said life isn’t about saving money, getting rich or building net worth. It’s about being in the position to buy freedom. Not letting fear get in your way is the first step to being free.
2. Don’t be afraid of debt
A lot of property owners never become investors because they’re terrified of debt. Their wisdom is to spend 30 years paying off their home until they owe zero on the mortgage.
Grant thinks that’s crazy. If that’s your wisdom, he believes you don’t truly understand real estate. Those people are sitting on huge assets that are being underutilised.
Great says real estate can support debt – that is, by using its good cash flow to fund the debt. The income from the property should be able to support the debt, which you can then reinvest.
Let’s say you have $5 million worth of property, and you’ve got $3 million of equity in that portfolio. Grant said not only can you can use that money to invest, but it’s also cash that’s sitting there in holding.
Why wait 30 years for that money? That’s money Grant would use now to reinvest and to build more wealth via debt.
3. Don’t overleverage
There is a caveat to tip number 2 above. Grant keeps his debt at 65-70% of a loan-to-value ratio. That’s about his maximum.
In an exceptional case, when the cash flow is really good on a property deal, he’ll push it to 80%. But generally speaking, a buffer of 30-35% is the way to go, he says.
4. Re-invest everything you make
Grant says he lives off “nothing”. This is a dude that could be sunning himself on a massive yacht and never spend another minute worrying about cash. Instead, the income he makes, he spends on buying more real estate.
Sounds hard to believe? Here’s how he works it for him.
He believes that whatever percentage you “give to the government” in tax (about 40% in his case) you should be stashing away that same percentage to buy real estate.
Grant then uses the remaining 20% on enjoying his best life. He calls that 20% his passive income. While we were chatting, I noticed his beautiful watch – a Patek Philippe 40th anniversary time piece. It’s worth a couple of hundred grand! He bought that expensive watch for himself out of passive income – the 20%. From one month of passive income in fact. The next month? He was back in the black.
5. Go big or stay home
Grant believes real estate with strong cash flow is key to securing your finances. Cash flow is king. But for Grant, one stream of income isn’t enough, so he wouldn’t buy a single unit. He’d buy the whole building.
“It’s the only thing you should be looking at,” he told me of buying big.
He focuses on one deal, one transaction, 30 units. Or more. Buy the whole building and never sell them to anyone. The cash flow should support the debt. One door is a waste of Grant’s time. Why buy one income flow?
He thinks of it like a casino. If a casino opened and had just one table inside, it would be crazy. A dumb business model. Casinos have hundreds of tables with multiple streams of income. They invest in cash flow.
Of course, not everyone is in a position to buy an entire apartment building. But going big on your own scale should be your focus, he says.
6. Join forces with others
Grant’s start-up capital for big real estate deals came from his successful businesses. Not everyone has that ability. But Grant says if you don’t have enough, go and raise it.
Everyone wants to invest in real estate. How many have the time and know-how to do it? How many have enough money? Not many. Go to those people and put together a syndicate to be able to fund the big deals.
Assemble a venture that lets them win on a deal they couldn’t secure on their own. There’s power in partnerships, so utilise that power.
That’s what Cardone Capital does. He now partners with investors on major deals – big buildings with lots of units. He’s like the Goldman Sachs of real estate.
But the really important focus for Grant? Treat people well and don’t be greedy. Reward your partners for their faith in you by taking care of them.
7. Don’t rely on ‘customers’
While Grant loves thinking big, he only likes certain types of big properties.
He’s not keen on hotels because they live and die by their customers. If travel markets sink or the economy goes to shit, so does the hotel.
The same goes for student accommodation, which is transient in nature. Students come, they graduate, and they go. Or they get itchy feet and want to live somewhere else.
His point is that there’s a difference between going big and going risky. Big moves should be calculated moves.
8. Commercial is risky
In that same vein, Grant thinks commercial property is risky because the way we work is changing. Offices are shrinking because companies realise housing staff in a static location is expensive and inefficient.
You only need to look at the ‘hot-desking’ phenomenon that began to boom a few years ago to see that businesses have realise floor space is a costly waste. Now, work from home arrangements are on the rise. So too are shared workspaces.
It’s an essential element in the growth of my own company.
Grant believes we’re moving away from offices. The problem with everyday people buying office space is that the calculations are complicated. Big tenants are demanding, and the economy dictates the lease security and income. In addition, small tenants are high risk.
But homes? People will always need somewhere to live.
9. Stop repeating the same mistakes
Grant’s 10X rule is based on learning from 30 years of business mistakes.
So, what does he consider one of his biggest mistakes? Grant believes his mistake was thinking too small –he wasn’t playing big enough and learning from that mistake changed his focus.
Before that, Grant did all of the right things. He used his talent and worked hard. He saved his money. But he wasn’t getting ahead. He was chipping away at a stone with a toothpick instead of the sledgehammer that was sitting right there. Grant says he was thinking small out of fear.
When he decided to brush off fear and back himself, he was determined to maximise his investing and think big.
10. Give back
Grant says that “giving back saved my life”, which is a pretty incredible statement from a man who has built a successful business empire. What he means is that by staying grounded and humble, he retains his core values as a person.
The Grant Cardone Foundation is an initiative he founded to raise money for a range of charitable purposes, from mentorship to financial literacy for underprivileged and at-risk people. He’s especially passionate about helping kids who’ve lost their fathers, as he did when he was 10.
Success gives you the power to buy freedom, Grant believes. But freedom gives you the ability to enrich the lives of others.
Grant Cardone is the very model of success from humble beginnings. By refocussing his efforts and applying some rules learned via experienced, he’s built an enviable real estate empire. True to form, he’s not keeping the secrets to himself, but rather sharing his knowledge with the rest of us.