Here's Why One Self-Made Real Estate Millionaire Says You Shouldn't Buy a Home

Young adult does their home finances at a laptop in the kitchen.

Image source: Getty Images

Real estate mogul Grant Cardone knows a thing or two about buying homes and building wealth. In fact, he credits real estate investing as paving the way to becoming a self-made millionaire.

But despite his success, Cardone isn't sold on homeownership. In fact, he believes that for many people, buying a home is not a smart investment -- especially given today's market. Here's why.

1. There are too many costs involved

When you buy a home, you don't just put a down payment on a mortgage, pay your loan every month, and call it a day. There are other expenses you'll incur when you own property. These include:

Plus, don't forget it costs money to actually put a home loan into place. Mortgage closing costs commonly equal 2% to 5% of the sum you're borrowing. Take out a $400,000 mortgage, and you could be looking at up to $20,000 in closing costs. All of these expenses could eat into your profits, making homeownership a bad choice.

Let's imagine you buy a home for $500,000 and sell it for $700,000 in 10 years' time. At first glance, it looks like you just scored a $200,000 profit.

Discover: We ranked this company the Best Overall Mortgage Lender as a part of our 2022 Best-of Awards

More: Our picks for best FHA mortgage lenders

But not so fast. What if you also spent $24,000 a year on taxes, insurance, maintenance, and repairs? Suddenly, you're not up $200,000 -- you're down $40,000 if you look at things from a pure investment standpoint.

2. You don't get regular cash flow out of your home

When you invest in assets like dividend stocks, you can get paid regularly, thereby increasing your cash flow. A home won't do that. Granted, you can borrow against the equity you have in your home if a need for money arises. But that's money you'll have to pay back.

3. The tax breaks are limited

When you own a home, you're privy to certain tax breaks. But Cardone says they're not compelling enough to make homeownership worth it.

Sure, you can write off your mortgage interest, as well as up to $10,000 in property taxes. But remember, these days, the state and local tax deduction is capped at $10,000, and that includes property and state income taxes. So if your state income tax bill is $9,000, it'll eat up the bulk of your deduction. And with the standard deduction being higher these days, you may not get so much tax-related upside as a homeowner.

Is homeownership a waste of money?

Cardone says point blank, "Don’t buy a home -- unless you can afford to waste money." But to be fair, you're not necessarily wasting money to put a roof over your head. Rather, you're covering an essential expense.

That said, if you're going to buy a home, it's probably best to look at it as an expense, and not as an investment. If your goal is to make money, there are probably better, easier ways to do so than to buy a home and sell it at a profit down the line. But if you need a place to live and you want the stability of not having to worry about being forced to move, then a home may end up being a good choice -- even if Cardone thinks otherwise.

The Ascent's Best Mortgage Lender of 2022

Mortgage rates are at their highest level in years — and expected to keep rising. It is more important than ever to check your rates with multiple lenders to secure the best rate possible while minimizing fees. Even a small difference in your rate could shave hundreds off your monthly payment.

That is where Better Mortgage comes in.

You can get pre-approved in as little as 3 minutes, with no hard credit check, and lock your rate at any time. Another plus? They don’t charge origination or lender fees (which can be as high as 2% of the loan amount for some lenders).

Read our free review

We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


More Related Articles

Info icon

This data feed is not available at this time.

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.