Nov 23, 2024
For someone who built their wealth on real estate, it should come as no surprise that Grant Cardone’s estate plan also revolves around this asset class.
In a recent video uploaded to his YouTube channel, the real estate mogul says he’s instructed his wife to sell off the family’s private jet and condo “immediately” in the event of his death. The one thing she should keep, in his opinion, is the vast real estate portfolio he’s accumulated over the years.
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“It’ll take care of you, it’ll take care of the kids, it’ll take care of our church and charities for hundreds of years,” he said in the video.
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Like the Cardones, many affluent families depend on real estate to pass down generational wealth. President-elect Donald Trump once inherited a real estate portfolio worth $413 million from his father, according to the New York Times, while the Rothschild and Rockefeller families have similar property-heavy portfolios.
Here’s why wealthy families focus on this asset class and how you can get a piece of the pie.
The enduring value of real estate
If you’re trying to preserve wealth for multiple generations, real estate is an asset class worth considering. Firstly, a piece of land can’t become obsolete in the same way a business can. In theory, that makes it a more durable asset class than stocks or bonds.
“That piece of real estate right there (...) will be in business longer than Facebook,” Cardone said referring to an apartment complex in his portfolio.
However, this asset also retains its value better over time. According to Chartered Financial Analyst Ben Carlson, U.S. real estate has delivered an average annual return of 4.2% from 1928-2023. Further analysis by Avison Young found that real estate investments tend to deliver positive real returns over longer time horizons of 10 years or more. In other words, property is a hedge against inflation.
These returns make sense intuitively. The cost of housing is a key element of the cost of living, so when incomes and inflation rise, rent and home prices do as well. This is why many investors add real estate to their portfolio for long-term financial objectives.
Unfortunately, the barriers to entry for this asset class have risen sharply in recent years. Home prices have surged 54% since 2019, according to the S&P CoreLogic Case-Shiller National Home Price Index. It’s fair to say buying property to add real estate to your portfolio isn’t as easy as it used to be. But, there are alternatives for investors looking to get their foot in the door.
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Getting started with real estate
If you don’t have enough saved for a down payment or can’t qualify for a mortgage, there are other ways to get real estate exposure.
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Real estate investment trusts or REITs are, perhaps, the most popular option. REITs like Realty Income (NYSE:O), Crown Castle (NYSE:CCI) and Invitation Homes (NYSE:INVH) give you access to rental income from residential and commercial properties across the country.
You could even add niche real estate assets to your portfolio via REITs. Digital Realty Trust (NYSE:DLR) offers a portfolio of 300 data centers that are a key part of the artificial intelligence revolution, while Lamar Advertising (NASDAQ:LAMR) allows you to invest in outdoor advertising and billboards across the country.
These REITs are usually focused on the equity in properties which means you own a part of the real estate and rental income. However, you could also consider mortgage REITs like the iShares Mortgage Real Estate ETF which gives you exposure to the debt on properties and allows you to collect a portion of the property owner’s mortgage payments every month.
Regardless of which fund you choose, dedicating at least some of your portfolio to real estate assets and/or properties could bring you one step closer to lasting wealth.
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Vishesh Raisinghani is a financial journalist covering personal finance, investing and the global economy. He's also the founder of Sharpe Ascension Inc., a content marketing agency focused on investment firms. His work has appeared in Moneywise, Yahoo Finance!, Motley Fool, Seeking Alpha, Mergers & Acquisitions Magazine and Piggybank.
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