How to use debt to create wealth LIVE 12PM EST - Grant Cardone

[Music] hey welcome to the cardone zone grant cardone every monday i come to you to talk about real estate i talk to you about your money your finances i talk to you about what's going on in the usa economy and around the world that you can take advantage of that you can be assured that i'm going to be here for you every monday to help you and your family with money speaking of money i got a bunch of this fiat paper right here uh this is i i guess that's uh 30 grand right there here's 10 000 and this is another 30 grand so i got about 70 grand i gave a bunch of this away this weekend at an event we did uh where i was talking about business business expansion today i want to talk to you about debt and you'll see you'll see a lot of people have a lot of different opinions on this i get asked constantly about this debt grant what should i have debt for when's good debt good debt when's bad debt bad debt i'm going to tell you that debt is absolutely necessary in order for you to create wealth if you want true wealth prosperity and affluence in your life you must use debt in order to get there i know there's a lot of people out there that will challenge this but today i'm going to show you how to constructively use debt in your life the difference between good debt bad debt i'm going to show you how to constructively use debt to create wealth and cash flow how to get cash flow for you and your family now dave ramsey is famous by the way i have massive respect for dave davis if your team sees this i'm sure um maybe they'll pass it on to you but massive respect for what dave's done he's helped so many families around not just in america but around the world to protect themselves from stupid debt consumer debt student loan debt car debt even home mortgages where people have over debted themselves on taking loans out that don't make sense and dave's done like he has been the leader around the world in guiding people out of this bad debt i don't know if we have a video clip of dave talking about this but um here here i saw something i think my guy showed me something this morning about u.s consumer debt is it 15 trillion dollars and this is why dave ramsey is so emphatic almost a fanatic on why debt is bad can you play the clip johnny it's not necessarily what dave ramsey thinks i happen to be the aggregator of the information meaning i've gathered the information over 30 years of walking with people with millionaires and billionaires and broke people so i have a lot of data a whole lot more than your broke brother-in-law with his opinion or the idiot you were playing golf with yesterday and his opinion our data says that the shortest direction the shortest distance between you and wealth is having no debt is it okay so the shortest distance between you and having no wealth is taking on debt so uh again i have massive respect for dave there's 15 trillion dollars this is what he's warning you against right here 15 trillion dollars of consumer debt in the united states of america folks that's trillion not billions most of that is consumer loans okay i want to i want a t-shirt so i go borrow money to get a t-shirt i want shoes for my kids so i borrow money i want christmas gifts or candy for halloween i borrow money there's loans you went and borrowed money to pay off your gambling debt or your drugs or your alcohol binges or whatever it is right that's that's the debt that dave is talking about the that will is the shortest route to zero student loan debts i think there's one point i think the number let me just see what student loan debt is in this country this is our higher education that's what they call it by the way before they get you to borrow money on it student loan debt this is one of the great travesties in our country by the way student loan debt uh keeps 15 million people in debt they're gonna wipe all this out by the way biden will try to get a bunch of voters like that student loan debt total crisis in america uh student loan debt rate outpaces rising tuition costs by 353 percent total of 1.6 trillion dollars uh 10 over actually 11 of the entire household debt in america is student loan debt so when is good debt and when is it bad debt okay am i right or is dave right or are we both right and i would suggest to you that we're both right because i'm not talking about consumer debt i'm talking about business debt i'm talking about turning fiat into real property actually i'm going to show you today how to turn this stack this ten thousand dollars let me see if i got any more of this garbage on me yeah i do happen to have a little rope one two three four five six seven eight nine ten i'm gonna show you today and i'm gonna be doing more of this stuff uh magic uh throughout the year i'm gonna actually show you some vehicles where you can do this i'm gonna show you how to turn this thousand dollars into four grand instantly and i'm gonna show you how to take this paper that is very vulnerable to fire wind storm uh theft and depreciation and the effects of inflation inflation basically says okay this was a thousand dollars now it's 600. or basically it goes like this it was a thousand dollars but now you need 1400 to buy the same product so you got to co that's what inflation is it it is either the the invisible thief of money or hey i got to add money just to pay for that same water bottle or the calculator the computer or the iphone okay that's inflation right the car was 50 grand now it's 60 grand the house was 400 000 now it's suddenly magically 480 000. inflation is a real thing in fact fact jack darcy talked about inflation uh friday he tweeted we are if you guys can show this um just so you guys know i'm not just making stuff up i've been accused of just coming in here and saying whatever i want to say which is by the way what i do i do say what i want to say and let's see what jack was saying about inflation jack darcy inflation and now i know this guy's a big promo okay jack darcy issues dire warning about economy as inflation source under biden i'm looking for his exact quote jack jack's got his his beard's got some inflation on it let me find jack dorsey's account and i'll just find that one hyper inflation gotta hate to waste hyperinflation hyperinflation is going to change everything okay so this show today is about how to use debt to create wealth the average consumer has 93 000 worth of debt today including consumer loans consumer debt loans student loans mortgages while apple computer has and and what dave said is debt is the fastest route to being broke just want to give you guys some facts this is as of this month okay in the last two months apple computer has if my date is right and i could be off by a little bit 120 billion dollars in debt and while they took on this debt they had 70 billion in cash now you tell me why a company one of the smartest biggest is a trillion dollar company why would a trillion dollar company one of the most successful companies that has ever uh blessed our planet why would they borrow 120 billion when they're sitting on 70 billion dollars in cash they're not stupid okay and they're not trying to go broke i'll explain this here in a second and how you can benefit from it let me just give you another example there's a company called google or today it's called alphabet they change their name it sounds like facebook is going to change their name google today has did a 10 billion dollar last month 10 billion dollar debt offering it's called a bond okay you should be learning this stuff so you and your family can figure out how do i get how do i get part of these guys oh these two companies don't pay taxes isn't that interesting okay because if you don't use debt by the way you will pay too much in taxes for those of you paying attention i'm doing a whole real estate webinar on this we can give it to you grant cardone.com forward slash rei complete training on this three hours grantcardone.com forward slash rei and then i'm going to do a five day training trying to do it before the end of the month but my staff is fighting me saying i got too much to do but if you go grab the grantcardone.com rei i'll put you on a list so that you can get the five-day training for free we're trying to do that this month before the end of the month johnny um google amazon check this out amazon's not a bad company seems seems seems like they know what they're doing another trillion dollar company amazon today has 33.7 billion dollars in debt i don't think i finished the google google has a total of 14 billion in debt this is just something they wouldn't grab last week 10 billion amazon in amazon by the way has 73 billion in cash now you tell me how a company has 73 billion in cash and then they're like we'd like to go bars 33 billion they didn't use their cash to borrow the money they used the debt to borrow the money to borrow more money that they didn't even need because they think the debt is actually cheaper than using their cash now you got to put you wrap your head around that and you're going to understand that maybe some of this debt is actually a benefit to these companies that pay very little in taxes and have massive expansion t-mobile t-mobile has 75 billion worth of debt i think you know that company at t 180 billion dollars within debt uh at t is not just a telephone company anymore they a media company uh what does at t own like almost like all the media you see in the world today right johnny facebook has 12 billion dollars the least of all the groups 12 billion in debt they're probably going to borrow some money here soon just to change their name companies often use debt if you look it up on the internet why do companies use debt companies use debt when constructing their capital structure because it has certain advantages compared to equity financing equity financing what is equity financing uh equity financing is uh i'm doing a deal right now it's a 200 and let's say it's a 250 million dollar deal okay and i go to the debt market i go to the debt market and i'm like hey i want to borrow as much as i can on this asset this asset i'm just giving you a big example right now they're like yeah grant we love this asset we'll we'll lend you um um we'll lend you uh let's say uh 190 million dollars on this asset so grant you need 60 million dollars to buy the deal i'm giving you a crazy example maybe i should take it down a little bit a notch okay let's say there's a 250 000 uh apartment building you want to buy and the the the the the um the bank says yeah we'll lend you 190 000 on the deal okay you need 60 000 to buy that that 250 000 deal this is called leverage okay now there's some real reasons why you want leverage you can't get this with a belt or a pair of shoes or a christmas gift a birthday present you can't get it with a car you can't get it with cash okay when you take cash if you take one thousand dollars three four five six seven eight nine ten you take a thousand dollars you understand you can't take a thousand dollars and borrow a thousand dollars much less four thousand dollars okay see this is this is the problem with money okay no you can't go to the bank and say look i got a thousand dollars i want to borrow a thousand dollars they'll be like uh once you just use your own thousand dollars okay even if you did that even if you could get a bank to do it because some of you do have a bunch of money you would call this a credit line you'd be like i got a hundred grand in a bank i want to borrow a hundred grand i keep my hundred grand in the bank okay you the bank now has first dibs on it and i want to borrow debt a hundred grand of debt on a credit line and i'm gonna go use the hundred grand i'm gonna leave this over here i'm gonna leave this at the bank and i'm gonna borrow the hundred i'm basically borrowing my own money and paying four five or six percent people do this every day folks but they don't use it to buy gamble to buy alcohol to buy uh this is what dave is trying to tell you the fastest way to being broke is to use debt to buy junk but what if i took this ten thousand dollars right here okay and i magically i magically took the thousand ten thousand dollars okay you talked about inflation earlier and what if i bought forty thousand dollars worth of buildings okay notice what i just did i leveraged garbage to buy a building let's say this is a building now not cash i basically go by forty thousand dollars worth of real estate that produces little babies okay so watch i'm gonna take i don't know johnny if you get the shot down here right here but i'm gonna take a thousand dollars i'm gonna grow it up to four thousand dollars and it's gonna have little babies okay it's gonna give me back this year it's gonna give me back um that's ten thousand it's gonna give me a thousand dollars back every year okay so what did i do i just took this this will not pay me a thousand you understand this by itself the 10 000 will not pay me a thousand dollars a year no bank in the world does this pull out johnny but when i take this and i leverage it into a building i really need this to be like monopoly houses right now and i leverage it into a building this because it has cash flow can then produce more of this in fact in 10 years i will replace this okay so why am i telling you that's why google was that's why these companies leverage leverage cash they take this cash whatever this number is don't get confused by how much it is it's 60 million i'm doing a deal right now i'm gonna take 60 million dollars and i'm gonna buy a 250 million dollar building johnny tell me if you have questions on this while you're watching it as an audience okay but our number by the way is 305 uh 865 8 305 865 8668 okay one thousand dollars cannot borrow one thousand dollars most of you cannot do that and then why would you okay why would you unless you want a credit line you got a business but nobody you can't go to the bank and say i'm born a thousand dollars gonna be like what for uh i wanna my wife yeah yeah we're not doing that man in fact they're probably going to be suspect if you're only asking for a thousand dollars now you go to them and say hey i need a hundred grand they're gonna be like okay you you must have a business you want to invest in companies use debt often use debt when constructing their capital structure why do you need to know that because you as a household are trying to build a capital structure not just have a job if you continue to simply have a job make money then you go make sixty thousand dollars a year and the government takes fifteen thousand dollars of that and you gotta live on forty five thousand dollars okay th this is your this is what you gotta live on you're never going to get ahead you're never going to get a wealth and i would just suggest to you that the fastest way to to to uh being broke is to continue to operate in the fashion that we've been taught that this one job over here this one job that is heavily taxed okay by the irs is the fastest road to poverty is because you're not figuring the game out now what i need to do is i need to convert some of this cash here to assets when i convert cash to assets i get a multiplier sometimes four to five x multipliers sometimes 15 x if i'm making the right investments okay our average real estate i don't know johnny can you show them the deal i'm doing right now nathan you got it you got i'm going to show you the deal that i'm talking about right now i'm going to take 60 million dollars i'm going to convert the 60 million into that building right there i'm going to borrow 190 million dollars okay and watch what's going to happen i think this thing's going to throw off 3.6 million dollars in cash a year can't be sure that but that's what i think it's going to do that's in the first year where rents are where they are today now this is 2021 is that what we're in i'm not going to sell this won't even consider selling it until 2031 if i ever sell it at all the rents on this building right now about twenty four hundred dollars the location is ridiculous i'm one and a half blocks from every restaurant in fort lauderdale on the biggest property with the biggest pool with the best amenities and the best location in the entire city of fort lauderdale of about two million people location's ridiculous can't be replaced this is an institutional quality asset the rents are 2400 today what do you think those rents will be in 2031. 2031 would be like 4 000 bucks exactly they're gonna probably be uh uh maybe double what they are today as those rents go up i fight inflation now these rents these rents have been going up seven to eight percent last year i think those rents are up eight percent in one year if that rent changes by 10 in the next two years that means i end up with another 240 dollars just ten percent over the next two or three years that's three percent a year okay that rents will go up 240 there's 456 units here times 240 times 12 i would produce 1.3 million dollars in new income see this number right here i'm going to circle this one and i'm going to circle this one okay now my building is producing 3.6 plus 1.3 that's almost 5 million dollars 4.9 million divided by 60 million that's what i put down the garbage by the way oh in the last in the next three years the 60 million will be worth more or less the 60 million i gave the bank it's going to be worth less whoever got that money that if they just sit on that money that money will be worth less 1 000 out of 1 000 people would agree 60 million dollars today will not be what it's worth three years from now will the building be worth more or less most people would say the building is going to be worth more money okay now i now am making 8.16 on my investment and you're like eight percent it was six okay if you divide six by eight uh i just had a let me see well i increased by two right so if i go from six to eight i increase my returns on this property by 25 in one year you guys don't think much of two points but companies do companies often use debt when constructing their capital structure your household has a capital structure your money has a capital structure you just don't act like a business because it has certain advantages compared to equity financing okay see this right here the 60 million dollars see this right here this is the debt financing okay so i'm going to give you what's called a capital structure don't get lost this has everything to do with you guys you're like man i don't understand what you're talking about right here it's because you don't have not been educated on capital structure if the debt does not support a capital structure you should not take the debt and it is not true that all debt is bad debt because these companies aren't stupid companies these are the biggest companies in the world folks so capital structure what is the capital structure okay you have the asset you have the equity and you have the debt so if i go to the debt market and today these companies are going to debt markets they're born money for 2.7 but when they bring investors on equity that's an investor here okay or it's your cash your cash is trash it's garbage you wouldn't leave this right here would you nobody would leave this i could tell you why it's garbage okay you wouldn't leave it's susceptible to loss and if the depreciation and inflation and fire you wouldn't just leave it here without protecting it now would you leave that building can you show that building would you leave that building there this weekend you worried about it sure it's going to have fire alarms and sprinklers because it's protected it's going to have tenants and security it's going to be there next week next month you can't just leave this here anymore by the way then you should guys should be leaving it in the bank in the ira in the keo you got you got you're leaving garbage and the bank doesn't leave it there when you give this money to straw swab or fidelity or row or whoever you give it to you know what they do with it as fast as a flick of a button they lend it out to other people as debt they lend it out or they lend it out as equity okay now what i this is what what what i've done i've done what's called crowdfunding crowdfunding is i go to my friends many of you on the internet many of you on youtube uh instagram you come to my offices you go to our 10x growth conferences you come to our real estate events uh you're in my real estate club i offer this to you guys rather than all the other equity sources in the world okay typically equity sources are family offices family offices goldman sachs equity firms okay these are typically wall street firms and wealthy wealthy people i have chosen not to get my money from those people and instead because they're already enriched i instead i have decided to go to real people bob beverly john karen dolores my friends on clubhouse and said hey guys i want you guys to be my equity in this deal now when i do that you guys got to understand this i'm doing you a favor because this is what i can pay the bank i have the money to buy this deal already i'm trying to get rid of my cash to convert it to wealth okay 60 million dollars can buy 250 million dollars with assets i immediately become worth a quarter of a billion dollars of assets it doesn't it doesn't my net worth doesn't increase to a quarter of a billion overnight but what happens is my money my money my garbage converts to something of massive value four times more than the money was worth and i'm protected against d or inflation and depreciation okay of the of this asset class garbage class these people that come on i give them percentages of the business percentage is way greater than 2.7 so i want you to write this down equity costs more than debt the equity in your capital structure costs more than debt and google facebook apple uh they know that so they're like rather than selling shares dude rather than selling more shares in our company apple computer and this is going back to answering why does apple when it has 70 billion dollars borrow what was the number 120 billion why did they do that guess what they went and bought they wouldn't bought their stock back they went and bought the stock because they believe this stock is going to go up in value they know something that you don't know they know this for sure this is garbage okay what's worth less than this debt they use debt to cost them two percent to buy an asset class that they know can go up in value also if you notice if you notice right now check what facebook and google and amazon are buying right now what are one of their biggest investments right now what are they using all this debt for to buy back stock and to buy real e state okay i want to sum it up with this and then i'm going to give you i'm going to give you the simplicity of what i just shared with you that might go over some of your heads and the only reason it's going over your head it's not because you're dumb it's because none of us have taught anything about capital structures we're taught how to go get a job do a good job cross your fingers hope you hope they give you a raise every once in a while and then i'm going to save my money and one day i'm going to retire and hopefully i got something left it's all a freaking hope game while everybody around you is the world around you is borrowing money like at crazy rates three things when taking debt actually i'm gonna give you five things when taking out debt okay if you if you follow these five things when taking out debt debt will become your friend not the devil and this will be the fastest way to grow wealth if you just don't violate any of these rules number one number one when taking debt okay you ask yourself this question does it create wealth does it have any chance to create wealth okay so when you're at the target store and you're like oh man i'm gonna buy i'm gonna buy i'm gonna buy this belt i'm gonna buy this belt and and i'm gonna buy this soccer ball and i'm gonna buy this net and i'm about to trampoline with that is there any chance that that creates wealth okay meaning meaning by the way wealth means it can it potentially be worth more than the exchange okay when i showed you guys that building uh please put in comments do you think that building will be worth more money in 2031 than it is today it's a brand new building today it's 250 some odd million dollars do you think it that building it's a quarter of a billion dollars today will be worth more money could it be worth a half a billion dollars in 2031. number two does it provide leverage meaning when i borrow a thousand dollars and i go buy a thousand dollar ticket trip let's say i buy a thousand uh two two people to fly first class to la and it's a thousand bucks when i borrow when i take a thousand dollar a debt and i buy a thousand dollars worth of tickets can those airline tickets be worth more money kent number one number two does it provide leverage does it provide leverage where the thousand dollars bought ten thousand dollars were the tickets or ten thousand dollars worth of buildings okay three is it deductible is the interest on the loan if you guys just use this one right here you would not take 80 of the debt you wouldn't even take i i only use debt when i can write it off if i can't write it off i will not use it number four does it provide cash flow i say if it don't cash flow i say no so if the interest rate is two percent and i'm earning six percent on my money hey i'm making four percent on somebody else's money other people's money so if i'm paying two and i make six i earn four on whose money somebody else's this is called opm and number five and by the way everybody knows about opm that gets rich i mean real rich i'm not talking about 50 million dollars or 10 million dollars of wealth or a million dollars this is what ramsay was saying about i ain't talking about you you're broke you broke a golf buddy down the street or your uncle who who could be worth a couple million dollars he was not talking about me by the way let me just say dave ramsey was not calling me an idiot come on they got we got 10 000 apartments that pay me every single month and number five can i depreciate the assets that i'm purchasing so i'm going to take a u.s dollar i got that guy's name in god we trust okay it's got a hundred dollars on it and i'm going to convert it to a building or buildings okay 456 units that pay me 2500 bucks a month 12 times a year times 12. okay times 10 years or 20 years or 30 years okay and we're going to take this we're going to take this bad boy out to 2051 now that building could be worth a billion dollars in 2051. and i'm gonna borrow money against this thing i'm gonna convert this garbage piece of paper whatever that is into that building okay this is gone now this i can write it off check mark number one i can write it off number one does it create wealth number one i check it off yes it created a lot of wealth it created way more wealth number two does it provide leverage tremendous leverage i turn dollars into a building three is the interest rate deductible the interest on this alone is going to be two one 190 million dollars times uh this is the interest on this loan times .025 the interest on this loan is going to be 4 millions the interest is going to be 4.7 million dollars a year in interest and the entire amount 100 percent is deductible all of it is deductible number four does it provide cash flow this deal is going to pay me 3.6 million me and my investors 3.6 million dollars a year 300 grand a month we're going to be paid to own the building and to write it off okay and number five i'm going to probably write off in the first year check this out out of 250 million i'll bet you we write off a hundred million dollars from our investors taxes and we will only own the building two months in 2021. i just hope the irs doesn't see this and get all annoyed with me and say we got to stop that guy okay 305. i forgot all right max hey max if we could keep do you have a i bet you have a deal but let me ask you before that if you've been listening to the show what did you learn about good debt bad debt today not all well pretty pretty much i've just been on hold this whole entire time but not all that as bad as uh yeah exactly that's for sure okay cool do you have a deal or do you have a question i got a deal i got a great deal for you a great opportunity it's on 10x.com the address is 4599 redmond road rockport new york 4599 what road redmond r-e-d-m-a-n and then road yeah in brockport new york yes sir the brock apartments that's right the rents are 6 55 to 11 15. okay is this section 8 this is not section 8 this is student housing i talked to you a while ago we went instagram live a bunch of yeah what what's the uh what's the uh the uh the university that it supports it's at uh brockport state college okay i don't know i've never heard of that school cool looking building by the way really cool i like the brick i like the brick yeah good good good location good bones cool pretty new construction it's right next to the college um how much so it's that it's at auction right now bidding starts in six days and starting bid right now is 3.7 uh for it yeah uh they had a loan out for 24 million dollars the company it says they went belly up just because you know covet oh yeah kobet yeah because kobe kova destroyed student housing around the country because people weren't going to school anymore so so what is the what do you think uh the starting bid is 3.7 the loan is how much it was like they they went backwards down alone it was like 20 i think the total development was 24 million 24 million they went backwards okay so look do you how many how many units so four 401 units right how many 401. okay 401 they're selling beds here probably four beds per unit right no they're all mixed they could be one bedroom two bedrooms three bedrooms it's all different all right so is this your first deal no no no no i have i own a bunch of houses already i have 70 units of real estate is this your first student 400 housing deal in student housing right now okay what i would do is i would do that i would do 3700 per semester and that would be 1.5 yeah that'd be 1.6 million per semester which would be 3.1 million dollars a year for that property yeah and i'm getting the semester because for the regular school semester it's about five six thousand dollars a semester so this one here newer construction there's a lot more amenities it's um still close to campus uh you know and people have a lot more freedom the schools have gotten pretty strict so that when i when i did everything with the cap rate the cap rate was 30 percent um the irr was 115 per year um for the idea which is roughly 260 000 uh a month yeah for that for that property and i would want to exit the property in about 10 years and we can even take it to a whole different level and you know use it for a good you know place for marketing we could have events there we can have art shows there we can have maybe a comedy show there as well i mean there's there's definitely opportunity there at that specific location there okay sounds like you got it all figured out man i definitely haven't figured out you know i just want to present it to you um because you know i'm you know i have a bunch of houses that are on that area and um been really successful with that yeah so in about in two years i'll be able to sell everything that i have um i did seller financing so i can't i can't pull any equity out or i can't sell the properties early or anything like that and i'll have about a probably about 900 how much cash do you have right now cash on hand is about 170 000 okay you're not going to buy this thing no no no no no that's why i need you yeah so look it's 114 units not 401. it's 114 with 401 beds hang on a second built 2009 12 acres it's got 275 parking spots you need cash to close this deal okay you'll have to have the cash plus whatever if they had a 24 million dollar loan this thing is going to probably sell for 24 million dollars at least and you'll need another 2.4 million to buy the thieves at 10 10 x um i say these because they tried to steal my 10x and um the starting bid of 3.7 is not what it's going to be it's 58 occupied you will not get a loan on it you need to close with all cash i don't know how you do this deal i don't know how i would do this deal and there's so many other good deals out there that can cash flow from day one but you guys have always heard me say i've never been a big fan of student housing when it works it works great and when it don't work it is awful next caller hope that helps brock uh mr brock brock the brock property max the brock he gonna call it max brock brock max next caller all right we got tony in detroit tony i hope you have a better deal man please i don't have a deal grant i just got i got a few questions okay the deals that i have our garbage up here in detroit and i don't it's terrible it's terrible so anyways i own a building it is a uh 4 500 square foot office building it holds my real estate office i sold the business and i'm now renting to the guy who bought the brokerage i generate 5500 a month in cash flow total in total rents and i'm trying to refinance the building because i'm at a stupid ring and i figured i'd pull a little bit of money out yeah i like that okay so payment right now with taxes is 2 500 a month tenants have been in the property since 2013. i've got another four years on the lease they're extending it they're not going anywhere and i'm one of their top sales people in the company yeah so okay so look this is what this is this is what i would tell you to do what do you think the building is worth today 750 000. okay good so the first thing you need to do is you need to go back to your guy and say hey i want to extend this lease to 10 years you need to do that before you go to the bank because it's going to give the bank comfort all right okay so so what what is the rent they're paying now is it you just got one tenant there i got one tenant yep is he a good tenant is he a credit worthy tenant oh yeah they've got nine offices over 200 agents oh yeah that's beautiful bro so so and how what do you owe on the property 210 000 oh that's that's beautiful so what you're going to do and what is that interest rate on the 210 thousand uh six point five six point four nine something like that yeah good so you and when can you pay that loan off i could pay it off any time there's no penalties okay good so you're going to go back you're going to go and who's the lien on that who who's got the that mortgage uh first state bank local bank okay good so you're going to go back to them say dude i want to refinance this i'm going to pay you off just tell them i'ma pay the loan off man how much how much notice you want just open with this i want to pay the deal off i'm going to refinance it with somebody else they're going to be like no man refinancing with us okay but you're not huh you do want to they don't they don't want to yeah good good so they don't want to that's good because they're they're they're that's a crummy loan anyway you're going to go borrow this money hang on a second hang on a second you're going to go borrow 450 000 you're going to pay them off you're going to walk away with 240 000 in cash you're going to end up with a new loan at um 450 and you're going to pay you're probably going to pay everything property taxes insurance i'm going to put everything in one loan okay 450 times .0625 you're going to pay uh 281 000 a year right now what what's your let me 281 wha what's your income from the property right now your free cash flow is yeah you're going to pay uh you're going to get you're going to walk away with 240 000 a non-taxable event fannie mae freddie mac or find somebody that does office i can turn you on to a guy here that i work with that can they can show you uh who would be a good loan for an office deal please okay that's that's number one number two it was watching squat box this morning and they said congress wants to eliminate borrowing the money on your equity congress wants to eliminate what you know how you you keep saying but uh buy the property rate when the equity goes up pull 75 out continue it cash flowing the rents are going up yeah and they want to eliminate that yeah of course they do i thought of you immediately it was like wait a second this is insane this is the reason i'm getting into this yeah the federal uh housing finance agency announced today that fannie and freddie will eliminate the hotly contested half a percent refinance fee to help families reduce their housing costs no this is the one on the commercial properties oh yeah yeah you're saying congress they're not going to do that bro they just saying that to get votes ah we against the rich people okay they the these people are such liars it's unbelievable so they're never going to do that um this is like warren buffett saying i want everybody we should increase the taxes and everybody's like oh warren's such a good guy warren doesn't earn income yeah this is congress saying hey i want some time to talk i want to i want to talk we should get rid of this and then when they go to vote don't get rid of that they just tell y'all get rid of it look at me nancy everybody should wear a mask but she don't right the audience they all do that yeah exactly of course they all do that man they gotta win votes so they're going to tell the people whatever the people need to hear so that's that's why everybody hates politicians look democrats don't like their own democrats republicans don't even like their own republican you know nobody likes politicians and then when we finally get somebody that's not a politician we don't like him either we just don't like ourselves okay but i tell you what i do like i do like real estate that has debt okay so why why do i like it what are the five rules if you guys remember here's the rules when you take debt out if it does not increase your wealth do not do it i would take money out of my ira account my 401k my cash accounts my money markets my savings account i would borrow money against my life insurance if i had any to borrow real assets because it creates wealth number two does it provide leverage yes okay when i can when i can take a thousand dollars well i'm gonna show you guys something where i can take a thousand dollars and i can get four thousand dollars worth of real estate that is smart that is a lot smarter than taking a thousand dollars down and buying a 58 000 car cars gonna go down in value this asset will go up in value and provide cash flow number three is the interest on the loan tax deductible interest on a car loan is not tax deductible interest on a student loan not tax deductible interest i don't think it is a small portion of your mortgage your interest on your mortgage is tax deductible and after that it's not on an apartment deal on an office building on industrial on a warehouse on storage 100 of all the money is tax deductible including which is crazy the fees to get the damn loan i hire a lawyer to look over the documents of the loan i get to write that off number three or did i do number three number four uh does it provide my best buddy cash flow cash flow is the holy grail of finance okay as long as it cash flows it'll get me through the bad times i get paid four percent five percent six percent while i wait and then as time goes on the rents go up and next thing you know it's eight percent nine percent or ten percent i keep waiting a little while now it's 12 or 13 or 14 when that building becomes worth more money in 10 years and that building that was worth 250 whatever million is now worth 425 million i go get a loan on this 425 million dollar building i never over leverage it why because i want the cash flow just hit these five points and you'll never lose and you'll create wealth for yourself 425 million times 0.75 is 3187500 what did i pay for the building i paid 250 million dollars i'm now getting a new loan of 318 million i owe i put 60 million down i owe 190 okay i have an event that makes me rich this is a hundred and twenty million dollars plus 60 million dollars we get rich the 60 million dollars is left over i i'm running out of room here this 60 million is a non-taxable event okay number five can i depreciate this over the 10 years i took this 250 million dollar building and probably wrote off a hundred million dollars let's say i sell it right here rather than refinance it i probably wouldn't it's not the smart thing to do if i sell it to johnny johnny and nathan put a fund together and they buy this deal for 4.25 they're going to write off 100 million too she's crazy two guys will end up writing off more than the building costs to build and that ladies and gentlemen is how you take debt and create wealth one does it create wealth two does it provide leverage three is it interest deductible is the interest on the loan deductible for does it provide you and your family with positive cash flow every month if it doesn't say no to it and number five can you depreciate the asset if you can depreciate on your taxes if it hits all five of those rules debt will create wealth and that's why big companies use debt to create wealth okay we got any more callers johnny yes sir let's go share this with your mom your dad your uncle your aunt okay a lot of people have a limited a very very narrow view of this debt thing because they haven't studied it deep enough and i'm just telling you from personal experience man debt when it's used right has been one of the best friends i've had in my my entire life all right darren in dallas darren what's up hello one of the hottest real estate markets in america today is dallas texas gotta talk you gotta start talking man let's go to the next caller ned what's up ned what's up man come on i had a quick question for you yeah yeah so basically you've explained how debt is great and i i completely agree and i found this um i found a deal i i made a deal work everything is good it's just the problem is is getting in debt really because of my experience and my credit yeah yeah um yeah so how do you is there any way around that or okay good so look what ned is saying is he found a deal he likes but because of his experience number one by the way this is the order when you're buying real buildings real assets good quality assets in great locations the order by the banks the priority from the banks credit score and then experience it flips now it's your experience to operate the building and your credit score is less important okay so they're going to ask you basically where's your equity coming from how much experience do you have and what's your credit uh what's your credit score like or your net worth okay your net worth because your net worth could actually your net worth could actually get over this credit score credit scores are not as important when it comes to buying real assets why because the real building show the building johnny see they're lending me money against that building okay what what would you rather do lend money against that building or my 730 credit score okay i got a building like that life insurance company says we don't care that you gotta we don't care that you've been slow on your damn car we don't really care that you've been slow with visa why look at that building again see that made my credit score look good you understand okay the other thing that's going to help is your net worth statement sometimes particularly in the beginning how big's your deal ned okay let's say his deal is 725 thousand dollars and he wants to borrow 500 000 typically you know they're going to look for hey do you have 500 000 worth of net worth which would suggest experience and that 500 000 probably won't include your house it's cash accounts it's equity and other stuff and they'd like to see equity and other stuff more than liquidity in a like like i'm doing a loan right now the bank's like we need you to keep 20 million dollars worth of liquid look liquidity i'm like bro ain't even any liquidity i ain't feeding you guys goddamn i know this game i ain't giving you guys my money why y'all want to give me a loan then you want me to keep you want me to keep a bunch of liquidity i got it i understand what you want that ain't happening my liquidity is in my damn real estate because it produces cash flow i don't have any dead money sitting around so you guys want to give me a loan then tell me keep your money dead at my bank uh-huh i got it i appreciate that let's go ahead and spoon it out but i ain't doing that just cause you wanna do it doesn't mean i'm gonna do it so what i'm gonna do is i'm gonna keep this 20 million dollars over here in this real estate account because it's going to pay me every month and how am i going to pay you if it doesn't pay me okay grant we good we good grant when we also want you to buy some insurance good well if you want me to buy some insurance what you pay for so you guys you can work all these deals with the bank so number one get your assets right okay get your assets right get your assets right two get your debt right start using debt on good things not bad things and number three get your experience right before you work before you run down the street and pay off your damn student loan okay if i had a student loan that wasn't paid back right now i guarantee you i could still get a billion dollars worth of debt because when i go to the debt market imagine this when you go to the debt market when you go to the debt market and we're going to do a we're going to do a whole training on this by the way if you want to get started on this go to grant cardone.com rei slash rei it's a three hour introduction to how i got started in real estate and how you can too and then we're gonna do a five day course probably at the end of the month one hour a day for five days because a lot of you said man i don't have five hours in one day but if you could give me one hour on deal one hour on debt one hour on where to get the equity one hour on how to manage one hour on how to pick my first deal imagine if you could find a one million dollar piece of real estate and with no money get a get get have two hundred thousand dollars worth of equity eight hundred thousand dollars worth of debt and you could become a fifty percent owner in the upside of that building and you could take that building i'll show you the exact building 32 units how to make that building worth 1.2 million more than you paid for it then they paid for it okay and how you could make 600 grand off your first deal with no money in the deal and i'm just giving you a scenario that's nine times smaller than my first deal i'm giving you a scenario that you guys can like believe in because i know you're like ain't nobody can make five million dollars on one deal okay well you definitely can if you don't know what to look for you definitely can if you don't know how to get the equity you definitely can if you don't know how to get the debt and you definitely can't if you give up before you even try my name's grant cardone and i'm here every monday to try to help the little guy and the little gal the people on the come up get up okay and i'm trying to ignore the the wealthy family offices that's why we created cardone capital and allow my friends the people that follow me on instagram and facebook invest with me in these big deals these institutional quality deals i'm trying to upset this game and and and give the marginalized most of us that have been marginalized and left out of the wealth game give you guys a chance to create wealth for your family either through education or opportunity i'm doing both of them here if you like the show today please hit the like button we like that if you don't like the show please hit the unlike button like i hate this guy and post it in comments because man it just i don't know something about your criticism just makes me blossom i'm immature like that i guess but i do like your feedback okay if there's something you want me to cover something you want that that i went too fast over if there's something you'd like to see more of any of you that want to grab our book how to create wealth investing in real estate just put below that you want the book and we'll get you a link to the book for free just put book and comment and i'll send you out how to create wealth investing in real estate amazon sells that book for 69 at the at their amazon site uh i'll send you the book for free uh just put book down below if you live in the united states uh you just take care of the shipping if you live in europe i'll ship it over there i'll send you a pdf of it save you the shipping across the way it is only in english at this time i don't know if it was translated to spanish yet but we're working on that so put the book below if you like this channel and you appreciate what i'm doing subscribe hit that little bell up there johnny can you get them to hit the bell and um again we'll give you the real estate course grantcardone.com rei grant cardone.com forward slash rei is a three hour course you just need to carve away three hours to sit down and look at that thing and then at the end of the month we're going to be doing a five day real estate course for free for those of you who want to learn the game on your own whether you're an investor or an operator i'm happy to share it with you god bless be great remember peace love and cash flow [Music] you

Channel: Grant Cardone

Views: 39,498

Keywords: grantcardone, grant cardone, 10x, money, finance, business, sales, motivation, yt:cc=on, WeAre10X, 10XNation, 10XStrong, 10XLife, 10XEverything, passive income, real estate, REI, multi-family

Id: v0nb5uFKesk

Length: 57min 25sec (3445 seconds)

Published: Mon Oct 25 2021