Cardone Capital is a crowd funding real estate platform which accepts investments from non-accredited and accredited investors alike. Grant Cardone is the CEO and founder, he has been notorious in the media for running clever scams however, not much has been done about it. Grant has been in the multifamily real estate for a considerable amount of time. The company claims that the investors at Cardone Capital have never lost any money on the deals and they only buy multifamily residential properties. However, testimonials from real investors seem to tell a different story (covered later in the post).
In this Cardone Capital review I’ll be explaining why you should avoid investing your money with this company. This post is not meant for bashing Mr. Cardone or Cardone Capital, but to show some details that have been hided from the public through paid media efforts.
Red Flags of Cardone Capital Being A Scam
ONE OF THE MOST PROMINENT RED FLAGS WITH THIS COMPANY IS ITS ALARMINGLY HIGH MINIMUM INVESTMENT REQUIREMENT OF $100,000 FOR ACCREDITED INVESTORS AND $5,000 FOR UNACCREDITED INVESTORS.
This is much higher than the industry average and it raises some questions which the company fails to answer. Cardone Capital has some exorbitant fees/expenses/charges which only favor the sponsor (Mr. Grant Cardone). Our sources suggest that Mr. Grant Cardone is making upwards of $1 Million only from the fees which he takes from the investors. Not only this, but the fee structure makes it difficult for Cardone Capital to lose money even if investors do, due to the market.
Another shady maneuver used by Cardone Capital is not revealing their financial information. And this gets even more dangerous when we consider the long history of Mr. Grant Cardone with scams and contreversious.
We cannot comment on the total performance of Cardone Capital investments as the company was only launched in 2017 and they are have a 10-year period structure. What we can do is take a look at the factors that play the major roles in determining whether a real estate crowdfunding company is reliable or not. Which we will do later on in this Cardone Capital review.
About The Founder Grant Cardone
Mr. Grant Cardone is a Scientologist who has done some very questionable activities including but not limited to, showering naked with his 9-year-old daughter while being filmed, abusing his mother months before she passed away and leveraging a homeless man for a social media post. The recorded evidence of all these activities can be found at this post.
The company is managed and founded by Mr. Grant Cardone who is a sales trainer and also claims to have experience in multi family residential real estate. As the leader, Mr. Cardone plays the key role in determining whether the company gives good returns to their investors or not. At the time of writing this Cardone Capital 2020 review, the company has 7,700 residential units which are valued to be over $1.7 billion.
Contrary to popular belief amongst his fans & followers, Mr. Cardone makes most of his money from selling merchandise, speaking engagements, books & courses. However, he & his PR team portray him as a real estate mastermind and a cold-calling genius. While we cannot comment on how good of a salesperson Mr. Cardone really is, we know for a fact that he has been investing in real estate for quite sometime. However, quite a lot of his real estate investments have backfired and resulted in mediocre results.
Mr. Cardone is a showman, but he lies a lot. He has been caught lying more times than you can count. The lying tendencies of the Cardone Capital founder makes it a very unreliable investment. A lot rides on honest communication when it comes to real estate crowd funding investments, and this is not a strong point of Mr. Cardone.
Crazy Claims of Grant Cardone Debunked:
HE IS TRYING TO MANIPULATE HIS AUDIENCE BY MAKING CLAIMS WHICH HAVE NO FACTUAL PROOF OF BEING TRUE.
We put our researchers on overtime to do a background check on Mr. Cardone. This is because online gurus like Mr. Cardone, Tai Lopez & Sam Ovens have dedicated PR teams which elope any media/content from the public’s eyes. Thanks to our talented team of researchers we found some very questionable videos and claims done by Grant Cardone. Let’s take a look at some of the claims Mr. Cardone has made in the recent years on his YouTube videos:
“Number of units is the number one factor in real estate”
This is a statement you can often hear in Mr. Cardone’s videos he posts on his YT and FB handles online. However, this is absolutely false. Number of units don’t matter if your real estate portfolio is producing loss. The most important factor in any kind of real estate is ROI (Return On Investment) not the number of doors (units) a company/person owns.
“You’ll be lucky to get a 6% return if you invest in real estate (elsewhere)”
This is not true. You can get 8-12% of return on investment if you use your money smartly in the real estate market. With the help of some real experts available in the market, you can definitely get good returns. You can ask any experienced real estate investor and you’ll get the same answer. However Mr. Cardone seems to disagree with this statement. The main reason for his disagreement is the poor Cardone Capital returns. Their returns are lower than the industry standard while being riskier than some of the estaiblished companies.
“My properties will be worth way more in the future”
The first rule of the real estate investing rule book, never assume appreciation. You never know what “exactly” is going to happen in the future. Various industries around the globe took a massive hit when the [email protected] outbreak happened. Almost no company/industry was prepared for it. There are many factors which play a major role in determining how much the value of a property will appreciate in the future. While the owners & managers can control some of them, the majority of these factors depend on the market. When Grant Cardone is saying that his properties are going to appreciate in value and give you (the investor) massive returns, he has some ulterior motives.
Cardone Capital News: They are falling apart
The company’s success only depends on an assumption that “nothing will go wrong”. However, because of the recent outbreak, things did go wrong and unfortunately Cardone Capital was not prepared for any set backs at all. With delinquencies increasing and more people not paying rent on time, Cardone Capital is struggling to stay healthy.
Grant Cardone’s “stay broke” philosophy backfired mercilessly. All of the foundational claims which Mr. Cardone made, proved to be harmful for his company. But he is not just risking his money and reputation, but the life savings of more than 3,000 people who were charmed by Grant’s videos and invested through his company.
Cardone Capital manages $1.5 Billion in assets with 85% leverage. According to the data available, Cardone Capital is supposted be paying $3.125 million per month for 61 months (5 years). After this point, the monthly payments for principal and interest will come down to $18.3 per month.
CARDONE CAPITAL WILL BE PAYING OFF THE INTEREST ON THEIR BANK LOANS FOR THE FIRST 5 YEARS OF ITS 10 YEAR PAYOFF PERIOD.
It is est. by our experts that Cardone Capital is about $11 Million short of pay in their interest and principal, which is a big amount.
Cardone Capital Laid Off 80 Employees
The Coronavirus has impacted everyone, including Grant Cardone. But instead of handling it as an ethical businessman, Grant showed his true colours.
HE LAID OFF AROUND 80 EMPLOYEES (OUT OF THE TOTAL 180 PEOPLE IN ITS WORKFORCE) IN MARCH 2020 WITHOUT GIVING ANY PRIOR NOTICE.
To avoid the legal trouble of firing this many people without any prior notice, Grant gave all of them the bare minimum benefits. It doesn’t end here. Grant also gave every one of those employees a letter, which said that if they contest this decision (of firing them) they can try it in court.
This decision of Grant’s shows the fragility of his Cardone Capital. It puts the reliability of the firm in question because he took this decision within a week of the beginning of the crisis.
No Rights for The Staff
All the laid off employees of Cardone Capital can’t sue Grant in the court for this decision. On top of that, Grant only paid them for 10 additional days (March 20 to 31) without any COBRA healthcare benefits or additional payments.
In response to this incident, Grant replied that being a boss is brutal. And added, “I don’t have to worry about the bills,” which is a very insensitive thing to say in this matter.
He could’ve at least paid them 3-months pay in advance so they could survive easily in these times. It was an inconsiderate move on Grant’s part to lay off employees with such little pay and benefits in this time.
Why is This Relevant for Investors?
The Cardone Capital layoffs are evidence of just how greedy Grant is, and how fragile his company is. You should know that Cardone Capital has a provision which forces its investors to commit to the investment for 10 years. This means once you’ve invested, you can’t go back for at least 10-years.
Considering the company you are investing with lost ~50% of its staff on a whim, this provision makes the matter worse.
Everyone is seeing Cardone Capital in trouble, and this incident is proof of that.
Companies are facing trouble everywhere, but Cardone Capital isn’t marketing itself like that. It promises to offer 10-year long investments with huge returns. If the company can’t afford to pay its employees, how can it promise to pay off its investors?
Why You Can’t Trust Cardone Capital Google Reviews
To check the authenticity of a digitally advertised company like Cardone Capital, which place would you go to? Most people read the Google reviews of a company to make a decision in this regard.
Google offers the facility of adding reviews to businesses listed on it. Anyone can give a review on any business listed there.
Cardone Capital has around 2000 Google reviews on its GMB (Google My Business) page. 99.9% of the Google reviews of Cardone Capital give it a perfect 5-star rating.
None of them reduce the rating to even 4 stars. Here are some reasons why you shouldn’t trust those reviews:
All of them are Throwaway Accounts
A common scam in Google reviews is when a person adds multiple reviews on a business using throwaway accounts. These accounts only serve one purpose: add a review. After that, they are not used for anything else.
It is an unethical black-hat marketing technique which many scammers have used before to reinforce a fake “good” reputation online.
The most popular method of checking if the reviewers are legitimate or not, you can see the number of reviews they have left on Google:
- If an account has only left 1-3 reviews on Google, then there’s a high chance it’s a throwaway account
- Another way to verify this is to check how many accounts of this nature (leaving 1-3 reviews) have reviewed the business in question
When we checked the Google reviews of Cardone Capital, we found that most of the reviewers fit this criteria I’ve mentioned above.
All of those accounts had left around one to three reviews in total. Most of them had only left one review on Google which was of Cardone Capital.
A 5 Star Rating is Impossible from 2,000 Reviews
Another reason why the Google reviews of Cardone Capital are so suspicious is the perfect 5-star rating it has. If Grant had kept it at 4.8 or 4.7, I might have ignored this but a 5-star rating seems highly improbable.
Here’s why.
Businesses with real reviews don’t have a perfect 5-star rating. It’s impossible because some customers would face problems and they will leave negative reviews. And even if none of the customers have a complaint, some will only leave a 4-star rating or a 4.5. Both of these factors cause businesses to have a 4.7 or 4.8 rating on Google.
Consider this example, below is the rating of a Tesla showroom in NY. It has 327 reviews, which is quite a huge number of reviews and its rating is 4.8:
And here’s the rating of Cardone Capital with over 2000 reviews:
ALL THE DATA SUGGESTS THAT CARDONE CAPITAL HAS FAKE GOOGLE REVIEWS. ALTHOUGH GOOGLE HIGHLY PENALIZES SUCH BLACK HAT MARKETING ATTEMPTS, CC’S ACTIVITIES HAVE FLOWN UNDER THEIR RADAR.
Suspicious Fee Structure of Cardone Capital
Cardone Capital charges a 1% annualized asset management fee, 1% acquisition fee on property purchases, 1% disposition fee for any property sales and 6% preferred return.
This is the first time we’ve seen a real estate crowdfunding company to take such exorbitant fees from their investors.
ONLY 87% OF THE INVESTOR’S CAPITAL GOES TOWARD PROPERTY ACQUISITION, THE REST IS TAKEN BY CARDONE CAPITAL IN HIDDEN FEES
As we highlighted earlier, Cardone Capital earns a whopping $1 Million per annum from just fees. Most of these fees are not explicitly mentioned in the contracts. They are cleverly hidden in between the legal jargon.
No other company in the market takes this much money in fees, which begs the question, why is Cardone Capital taking so much money in hidden fees?
This fee structure is very biased towards filling the pockets of the owners of Cardone Capital (Grant Cardone). These fees are non-refundable, thus ensure that Grant Cardone “doesn’t have to worry about paying the bills”.
Companies with long term investments like Cardone Capital do not charge high fees, because their primary renveu source is rent & selling the properties. However CC is not doing this.
The company taking high hidden fees suggests that Grant Cardone might be looking to exit the company with the money.
Major Conflicts of Interest In Cardone Capital!
Grant Cardone controls every property in which Cardone Capital have bought minority stakes. In other words, Grant is the asset manager and also the seller of the property which is being bought with the investor’s money.
This is a very dangerous and unreliable arrangement for the investors. To put it in even simpler terms, Grant is risking your money in the properties he controls.
CARDONE CAPITAL ALSO RETAINS 35% OF THE EQUITY IN ALL OF IT’S FUNDS.
You, as the investor should be quite careful with this company, because these conflicts of interest are very real and can have major consequences in the future.
According to the company’s documentation, an investor cannot exit the fund once they commit to it. That means, even if Cardone Capital loses all your money, gives you no returns whatsoever or treat you carelessly, there is nothing you can do.
Cardone Capital Review 2023 Conclusion: Should You Invest In Cardone Capital?
With the highest min. investment requirement in the market, lack of a repurchase plan, heavily biased fee structure and notorious owner, we do not recommend Cardone Capital as a good investment opportunity. The early investors are already losing money and because you cannot exit the investment once you commit, they are stuck.
We advise that you stay away from Cardone Capital and invest in safer and more viable investment oppertunities available in the market. You can also choose not to invest anywhere during these volatile times.
