How Does Cardone Capital Work (Business Model)LAST UPDATED: August 23, 2023 | By Conrad Golly
Grant Cardone is a real estate mogul known for his expertise in real estate investing. His company, Cardone Capital, specializes in providing opportunities for investors to grow their wealth through real estate ventures.
With a focus on high-quality properties, Cardone Capital offers investors a chance to become partners in lucrative real estate deals.
So, what exactly does Cardone Capital do? Grant Cardone and his team at Cardone Capital identify and acquire prime real estate assets, including multi-family properties, commercial buildings, and industrial spaces.
These properties are carefully selected to provide substantial returns for investors. By leveraging their extensive knowledge and experience in the industry, Cardone Capital maximizes profits and minimizes risks.
Cardone Capital makes money in two ways, from distributions and fees.
Cardone Capital operates under a 65/35 distribution split meaning they receive 35% of distributable cash from operations, refinance or sale of the property. Furthermore, Cardone Capital charges an acquisition, disposition, and asset management fee of 1%.
But let’s look at this in a bit more detail!
How does Cardone Capital work?
The basic premise of Cardone Capital is: you invest money, they take care of all the rest.
As the founder and CEO of Cardone Capital, Grant Cardone has been in the real estate game for a substantial amount of time. During the past decades, he has acquired a real estate portfolio worth several hundreds of millions of dollars and has recently started syndicating those deals through Cardone Capital.
Real estate syndication is funding an investment property through multiple investors. Usually, the investors in syndication are equal partners in deal and same-class members of the LLC owning the property. However, syndication can also be arranged in the form of real estate crowdfunding.
Real estate crowdfunding is targeted a different type of investor. Usually, the kind of investor interested in real estate crowdfunding is either less experienced in the actual real estate market or just does not want to deal with the hassle of actually managing a property.
In the case of Cardone Capital, Grant Cardone is able to attract a large number of novice investors who are usually non-accredited and don’t have the funds available to invest in syndication that rely on partnerships. This way investors in Cardone Capital deals are divided into Class A and Class B members of the LLC.
How much do you need to invest in Cardone Capital?
The funds for accredited investors start at $100,000 USD and the non-accredited funds at $5,000 USD.
One may wonder how to invest in real estate through Cardone Capital. Grant Cardone breaks it down in his renowned programs and books, offering step-by-step guidance on how to kickstart your real estate investment journey.
He emphasizes the importance of leveraging, networking, and seizing opportunities to build a successful real estate portfolio.
It is extremely unusual for real estate syndications to be available to investors with $5,000 USD. In this sense, Grant Cardone is true to his mantra of “fighting for the little guy” and making multifamily real estate deals available to everybody.
But as you can imagine Grant Cardone did not get rich by giving away anything out of sheer altruism. Combining his skills and knowledge of the real estate market with crowdfunding has not only given more leverage to buy bigger properties but also opened up an additional stream of revenue.
Here are some of the in which Cardone Capital makes money.
6 ways Cardone Capital makes money
Now, let’s talk about the fees associated with investing in Cardone Capital. As with any investment, there are fees involved to cover operational costs and management expenses.
Cardone Capital charges an annual asset management fee, which ensures that the properties are well-managed, maintained, and continually optimized for maximum returns. These fees are transparently communicated to investors, allowing them to make informed decisions.
Most of the exact fees and distribution splits we will find in the operating agreement under 5.2 Fees Paid to Manager and/or Third Parties:
How does Cardone Capital make money?
Here are 6 ways:
Operations comprise everything from maintaining the units and the property to running the day-to-day administrative tasks. The operating cash flow in a real estate company comes from the rents collected from tenants each month.
Cardone Capital operates with a 65/35 profit split on most (if not all) of their funds. This means they receive 35% of all operating profits. This includes all distributable cash that is left after rents have been collected, repairs have been made and employees have been paid.
Refinancing is the process of renewing the mortgage on a property usually at a better interest rate. In most cases, a refinance is also done to return as a chunk of capital back to investors and thereby increasing the capital on the loan.
Cardone Capital makes through refinancing because of the same 65/35 split mentioned above. This split applied not only to distributions from operations but also to those from refinancing. In the event of a refinancing investors’ capital is commonly returned first and the remaining profits are then distributed according to the split agreed upon in the operating agreement.
- Sale of Property
The sale of property usually ends the syndication and dissolves the LLC that owns the property. This is usually done once a certain profit factor has been reached or market conditions require a sale.
In the case of Cardone Capital each LLC – and thus each fund – is comprised of several multifamily properties. This means that the fund will not be closed with the sale of just one property and the investor will not receive 100% of their capital back when a property is sold.
Grant Cardone widely advertises a 3x return on the sale of the properties. He aims to hold the properties for as long as necessary (up to 10 years) until this goal is achieved or he deems it appropriate to sell.
Under the operating agreement in place with all of their funds so far the following happens when a property is sold: 1. Capital is returned to the investor until 100% of their contributions have been returned, and 2. The remaining profits are split 65/35 between investors and Cardone Capital.
- Acquisition Fee
Acquisition fees are charged to the LLC as properties are acquired. There are usually expenses related to acquiring a property which may include travel, negotiations and due diligence.
At Cardone Capital, the acquisition fee is 1.0% of the purchase price of the individual property. According to their operating agreement, “these fees are difficult to determine at this time”. However, it suffices to say that 1% of a multimillion-dollar property can amount to quite a sum.
- Disposition Fee
The disposition fee is made up of any expenses related to selling the property. This may include paying a real estate broker, market transaction costs as well as negotiation related expenses. In other words, fees charged to the LLC as properties are disposed of.
When investing with Cardone Capital you will b paying 1.0% of the sales price of the individual property when they are sold. Again you will find that “these fees are difficult to determine at this time” but same as with the acquisition and especially considering Grant’s of 3x’ing, 1% of the sale price is substantial.
- Asset Management Fee
Asset management fees are any expenses related to managing the property on a day-to-day basis. This may also include some of Grant’s travel expenses and other administrative costs.
At Cardone Capital during the first three (3) years, the Manager or its designated affiliate(s) will earn an asset management fee equal to 1% of the total aggregate capital commitments. Thereafter, the Manager or its designated affiliate(s) will earn an asset management fee of 1% of the total Capital Contributions.
Does Cardone Capital Business Model Work?
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 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.
How Well does Cardone Capital work For Investors?
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 according to current market conditions.
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.
When it comes to revenue generation, Cardone Capital has a proven track record of success. Grant Cardone’s syndication model allows investors to pool their resources and invest in larger, more profitable real estate projects that would typically be inaccessible to individual investors.
The revenue generated from these projects is distributed among the investors, providing them with passive income, wealth accumulation, and a solid financial foundation for the future.
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.
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.
My current investment recommendation among which is Fundrise for real estate equity investment and also other high yield and short term real estate debt investment options. Perhaps it would be a wiser choice if you’re looking for high returns, plus the liquidity and the ability to withdraw your funds when needed.
The Verdict: cardone capital business model
So, how does Cardone Capital make money?
Well, as we have seen there are several ways in which work of acquiring, managing and selling the properties are amply rewarded. Most notable the 65/35 – although be it quite common with real estate syndication – leverages the investors’ money to create profits for Cardone Capital.
With the creation of Cardone Capital, Grant has managed to transform his usual business of owning and managing multifamily real estate and develop an entirely new stream of revenue.
Mostly due to the unbalanced distribution split it is worthwhile taking a look at some real estate crowdfunding alternatives for non-accredited and novice investors.
Grant Cardone and his company, Cardone Capital, are leaders in real estate investing.
Through their strategic approach, they offer investors a chance to capitalize on the lucrative real estate market, providing them with valuable insights, guidance, and profitable opportunities.
With transparent fee structures and a successful syndication model, Cardone Capital paves the way for individuals to thrive and achieve financial freedom through the power of real estate.
I would recommend taking a closer at Holdfolio. You can read my extensive review here.
Also Check out these great reads:
- Cardone capital vs Fundrise
- Cardone Capital Review
- Cardone Capital minimum investment
- Is Cardone Capital A REIT
Do you have any experience with Cardone Capital? Would you consider investing?
Facts And Answers: How does Cardone Capital work?
what is cardone capital?
“Cardone Capital – Real Estate Investing for Everyday Investors. With Cardone Capital, there are no complex deals or confusing structures. We focus on creating real value with great assets. With over $4 Billion in assets under management.