Cardone Capital Review: Scam or Legit?

Are you looking to explore investment opportunities and considering Cardone Capital? In this comprehensive review, we’ll delve into every aspect of Cardone Capital, providing you with a detailed understanding of its operations, returns, fees, and more. By the end of this review, you’ll have the knowledge you need to make an informed decision about Cardone Capital as an investment option.

What is Cardone Capital?

Cardone Capital offers a unique approach to real estate investing that deviates from the traditional path of purchasing properties individually. Instead, it employs the concept of “real estate crowdfunding.” This strategy allows individuals to pool their financial resources and collectively invest in multifamily properties, even if they lack the capital to buy properties on their own. Cardone Capital’s primary focus is on multifamily properties, which are renowned for their historical stability and relatively lower risk compared to other real estate investments.

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Who Created Cardone Capital?

To understand Cardone Capital better, it’s essential to delve into its creator, Grant Cardone. Grant Cardone’s journey from overcoming personal challenges to becoming a real estate mogul is a remarkable one. At the age of 25, Grant faced adversity and struggled with drug addiction. However, through dedication and self-control, he managed to turn his life around. Today, he is widely recognized as a leading expert in the real estate industry.

Grant Cardone’s journey also involved a significant transformation in his approach to sales. Initially, he was not only terrible at sales but despised the concept altogether. Nevertheless, he persevered and honed his skills to the point where he now owns a real estate portfolio estimated to be worth a staggering $350 million.

Grant Cardone is not just a real estate tycoon but a multifaceted entrepreneur. His extensive business interests encompass Cardone Acquisitions, Cardone Enterprises, and The Cardone Group. In addition to his real estate ventures, he is a New York Times best-selling author, a prominent sales trainer, and a renowned speaker on leadership, real estate investing, entrepreneurship, social media, and finance. His global influence extends to motivational speaking, where he is known for promoting the “10X Attitude.”

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How Does Cardone Capital Work?

Now that we have an understanding of Grant Cardone’s impressive background let’s delve into how Cardone Capital functions.

Investing with Cardone Capital bears a resemblance to investing in the stock market. When you invest in stocks, you essentially purchase shares in a company, and your financial well-being becomes intertwined with the success of that company, depending on your level of investment. Cardone Capital’s real estate crowdfunding approach operates in a similar fashion.

The properties available for investment through Cardone Capital are primarily located in the southern and southeastern United States. Grant Cardone has repeatedly emphasized the promise of these regions due to their growing populations and ample job opportunities. The focal point of their investments is upper-middle-class to luxury residential listings within the multifamily property segment. These types of properties tend to offer higher and more consistent returns on invested capital, especially during periods of low occupancy.

When considering Cardone Capital investments, three pieces of data on their website may initially seem inconspicuous but hold significant informational value:

1. Total Units/Total Square Feet: The size of the property’s occupancy is crucial in assessing its profitability. Knowing how many people can rent a property helps in evaluating its potential returns.
2. IRR Target (Internal Rate of Return): This metric provides insights into the expected returns on your investment.
3. Multiple of the Targeted Equity Capital: This figure offers a perspective on the potential return compared to the initial capital invested.

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Cardone Capital Returns

One of the critical aspects of any investment is the expected returns. Cardone Capital aims to provide investors with a 6% cash flow target and a 15% annualized investor internal rate of return. Accredited investors have the opportunity to receive a 6% preferred return.

It’s essential to note that Cardone Capital’s investment funds are structured for a ten-year duration, making them a long-term investment vehicle. This means that investors should not commit capital they may need in the near future, as the investment horizon is designed for a more extended period.

Requirements For Investing In Cardone Capital

Cardone Capital stands out from other real estate crowdfunding platforms with its more accessible investment requirements. Investors, both accredited and non-accredited, are welcome to participate. The Securities and Exchange Commission (SEC) defines “accredited investors” based on specific criteria, including:

• An annual income exceeding $200,000 for the past two years (or $300,000 per household), with the intention to maintain that income level in the current year.
• A net worth surpassing $1 million, either individually or jointly, excluding the primary residence’s value.
• Investment as a bank, insurance company, registered investment advisor, business development company, or small business investment company.
• Investment as a company in which all shareholders qualify as accredited investors.
• Investment as part of a retirement plan, trust, charitable organization, partnership, or corporation with total assets exceeding $5 million.

Accredited investors can start with a minimum investment of $100,000, while non-accredited investors can participate with as little as $5,000. It’s worth noting that non-U.S. investors are welcome on the Cardone Capital platform but must meet the SEC’s definition of “accredited investors.”

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What Are Cardone Capital’s Fees?

Understanding the fees associated with an investment is crucial for making informed decisions. Cardone Capital charges several fees, and it’s essential to be aware of them:

1. Acquisition Fee: Cardone Capital charges an acquisition fee amounting to 1% of the purchase price of the property being acquired. This fee reduces your investment by 1% upfront.
2. Disposition Fee: Similarly, Cardone Capital charges a 1% disposition fee. This fee is deducted from your return when a property you’ve invested in is sold.
3. Asset Management Fee: Cardone Capital imposes an asset management fee equivalent to 1% of the total principal invested. This fee results in an annual charge of 1% on the total invested capital for the initial three years.

In addition to these fees, Cardone Capital employs a profit-sharing model. This means that Cardone Capital shares a portion of the earnings from the investment, whether through rental income or property sales. The exact share can vary, but typically, accredited investors receive 65% of the profits, while the company retains 35%.

It’s important to consider the cumulative impact of these fees and profit-sharing arrangements, as they can significantly affect your overall return on investment. In some cases, the 65/35 profit split may translate to something closer to 60/40 or even 55/45 when accounting for all costs.

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Who is Cardone Capital For?

Cardone Capital caters to a specific niche of investors who are interested in real estate but may not have the financial means to purchase properties independently. Here are some profiles of individuals who might find Cardone Capital appealing:

1. Individuals Interested in Real Estate: If you want to dip your toes into the real estate market but lack the capital to buy properties outright, Cardone Capital offers an alternative path.
2. Passive Income Seekers: Cardone Capital’s long-term investment structure can be attractive to those looking to generate passive income over time.
3. Investors Trusting in Grant Cardone: For individuals who have confidence in Grant Cardone’s expertise and track record, Cardone Capital may be a suitable investment option.

However, it’s essential to recognize that Cardone Capital is not a one-size-fits-all solution, and its suitability depends on your financial goals, risk tolerance, and investment horizon.

Is Cardone Capital a Scam or Legit?

One of the most critical questions investors need to address is whether Cardone Capital is a legitimate investment opportunity or a scam. It’s important to clarify that Cardone Capital is not a scam in the strictest sense of the word. The company has a substantial track record in the residential real estate market, managing a portfolio of over 7,700 units valued at more than $1.7 billion—a significant achievement by any measure.

However, concerns arise regarding the lack of transparency in Cardone Capital’s financial operations. While the numbers may seem impressive, the absence of comprehensive financial disclosure can be a cause for concern.

Investing in Cardone Capital is not a guaranteed path to effortless wealth. Like any other business venture, it requires substantial upfront effort, with no assurance of an immediate return. Profit margins can also be relatively small, which may not align with investors’ expectations of high returns.

Investors must weigh the potential advantages against the possible disadvantages and exercise caution when considering Cardone Capital as an investment option. Conducting thorough due diligence and understanding the associated risks is essential.

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Pros of Cardone Capital

Before making an investment decision, it’s crucial to weigh the pros and cons. Here are some of the advantages associated with Cardone Capital:

• Impressive Track Record: Grant Cardone’s extensive experience in real estate, combined with Cardone Capital’s claims of never causing investors to lose money, can be reassuring.
• Co-Ownership of Properties: Many properties managed by Cardone Capital’s investor funds are co-owned by the company, aligning their interests with those of investors.
• Beneficial Payouts: Several of the funds offer a 6% preferred yield, providing investors with an advantageous position in terms of profits.
• Constant Investment Opportunities: Cardone Capital consistently offers new investment opportunities, ensuring that there is at least one fund actively raising capital.
• Low-Risk Investment: Multifamily residential real estate is generally considered a low-risk investment that provides stability through various market conditions.

Cons of Cardone Capital

Alongside its advantages, Cardone Capital also presents certain drawbacks that potential investors should be aware of:

• Ownership Stake Without Capital Contribution: Cardone Capital’s practice of taking a 35% stake in funds without making a corresponding capital contribution can be seen as a disadvantage.
• High Initial Investment: Cardone Capital typically requires a minimum investment of $100,000 for accredited investors and $5,000 for non-accredited investors. These amounts may be relatively high for some investors.
• Leverage Potential: The potential for leveraging up to 80% of funds to finance purchases may introduce a higher level of risk, as prudent leverage ratios for commercial real estate typically range from 55% to 60%.
• Lack of Secondary Market: Cardone Capital’s investments have a vague time frame of “up to ten years” with no early withdrawal option. Unlike many other investment platforms, it lacks a secondary market or repurchase programs, potentially limiting liquidity.
• Divided Loyalty: Grant Cardone, the company’s founder, has interests in multiple other companies bearing his name. This could lead to divided loyalty concerns among investors.

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Final Verdict: Cardone Capital Review

Cardone Capital offers a distinctive approach to real estate investment, particularly appealing to individuals who wish to diversify their portfolios and participate in multifamily property investments without the need for significant capital. However, it’s essential to approach Cardone Capital with a clear understanding of its characteristics and potential drawbacks.

Investors should consider Cardone Capital as a long-term investment vehicle, with an investment horizon typically spanning a decade. This extended time frame may not be suitable for all investors, especially those seeking quick returns.

While entrusting capital to a real estate tycoon like Grant Cardone, with a net worth of $1.7 billion, carries inherent risks, it can also offer opportunities for patient investors willing to wait for their returns to materialize. In essence, Cardone Capital represents a viable investment option, but it’s not without its challenges and complexities.

Before deciding to invest with Cardone Capital, individuals should conduct thorough due diligence, carefully assess their financial goals and risk tolerance, and consider alternative investment avenues that might better align with their objectives.

In conclusion, Cardone Capital is a legitimate investment opportunity with its own set of advantages and disadvantages. It is not a guaranteed path to wealth but can be a viable choice for those willing to navigate the intricacies of real estate investing and the specific terms associated with Cardone Capital’s investment funds.

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