Cardone Capital is a real estate syndication fund run by Grant Cardone who is known for his holdings of multifamily properties across the US. Cardone Capital has also claimed to have opened up, traditionally real estate investments reserved for the ultra-wealthy to the average retail investors. But how does Cardone Capital actually work?
Cardone Capital is a private real estate fund that distributes dividends and rental income to investors on a monthly basis. Accredited and non-accredited investors can invest a minimum of $5,000 into a real estate fund of their choosing, receive monthly distributions along the way, and a return of full capital once all properties in the funds are sold.
In this article, I will look at exactly how Cardone Capital operates, when and how investors get paid, how much money you can make with Cardone Capital and whether investing in Cardone Capital is actually worth it.
How does Cardone Capital work?
As mentioned before, Cardone Capital runs a private real estate fund that you can invest a minimum of $5,000 in. You can invest this money simply using the web interface at Cardone Capital. After you have registered a new account and verified your KYC.
After you have signed the required legal documentation, you will be asked to transfer the capital you would like to invest to a bank account managed by Cardone Capital. According to their website, you can expect the first distribution of rental income from your chosen fund about 6 to 8 weeks after you have placed your first investment.
From then on, you should be receiving a steady stream of monthly payments which will roughly equate to 5 or 6% per annum. At the end of the property holding time or once all properties in a fund have been disposed of, you will receive a full return of capital.
This can be anywhere from three to over ten years according to Grant Cardone. The sale of the property will be determined at the sole discretion of Cardone Capital a ccording to current market conditions.
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How do Cardone Capital investors get paid?
Cardone Capital investors get paid on a monthly basis, according to the rental income of the property fund they have invested in. Distributions will be sent out via ACH to investors’ bank accounts and will arrive usually between the first and fifth of every month.
According to Grant Cardone, Cardone Capital has decided to pay out monthly instead of quarterly payments, as is common for other real estate funds because rents are also collected every month and as Grant Cardone says, “Cash flow is king“.
Investors in Cardone Capital also get paid in another way, i.e. through the return of their capital, plus the return on investment from the sale of the property, which, according to Cardone Capital will be 2 to 3x the original amount invested. This is a bold claim and so far investors have not really been able to verify this claim, as not many funds have disposed of all of their assets.
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How much money do you make with Cardone capital?
The amount of money that an investor can make per month with Cardone Capital depends on two factors. First, it depends on the capital that the investor has put into the fund. And second, depends on the cash on cash return target for each fund.
Let’s assume you have put in $10,000 into one Cardone Capital fund and the cash on cash return is 5% per year. Cash on cash return means those returns that are distributed monthly from the rental income. 5% of $10,000 is $500 and those $500 divided by 12 come out to 41.66 USD per month in addition to the monthly payments.
Investors will also get paid at the final sale of each property or at the closing of each fund, that is once all properties in the fund are sold. Here, investors will receive the full return of capital that has been invested, plus any return that has been generated by the sale of each property in the fund. This can be anywhere from 1.5 to 3x, according to Cardone Capital.
These two ways are the primary ways for investors in Cardone Capital to actually get paid. Both payments will be processed by Cardone Capital via ACH transfers and will be returned to the account that the investor has originally made their first investment with.
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Is investing in Cardone capital worth it?
In order to evaluate whether it is worth investing in Cardone Capital, we have to look at comparative opportunities out there and evaluate the opportunity cost of investing in Cardone Capital.
On a cash on cash basis a return of 5 to 6% from real estate does not look that attractive, especially when the stock market and the S&P 500 have returned over 10% on average annually over the past ten years.
Holding an index fund, a broad stock market index fund, would be significantly more diversified than a single real estate fund and would, in current market conditions yield better returns. However, the real payoff with Cardone Capital comes at the end of the holding period. Here investors can expect a 2 to 3 times multiplication of their investment capital, which would result in a significantly higher return and the average stock market index.
The internal rate of return includes their monthly payments to investors and also the profit generated from the sale of each property and is targeted at 15% for most of Cardone’s funds.
However, it has to be noted that the holding period for these funds can be extremely long and thus, it is necessary for you to access your capital, it is not worth it to put a large amount into this very illiquid investment, which is Cardone Capital. In such a case to get exposure to the real estate sector, it can be more beneficial for you to invest in a publicly-traded real estate investment trust or a privately managed fund that has more liquid asset structure such as Fundrise.
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