The Place of Alternative Investing in Grant Cardone’s Show
So let’s talk first about the place of alternative investing in the context of that program.
There was definitely a section in the middle there where he’s trying to share a real estate deal with some barbers.
Now, what he illustrated beautifully is that investing in these deals where you’re making money from nothing is not rocket science.
If you find the right language, alternative investing and that specific deal were very easily explained. But I just want to clarify a couple of points.
Number one, a lot of alternative investing is really about structuring deals and accessing strategies that sit outside of the mainstream. So things like the property syndication that he talked about, private funds, joint ventures, lending deals, those sorts of things.
They kind of sit to the side of what we think about when we think about traditional investing either in property or in managed funds, shares, bonds and things like that.
The thing to understand, though, is that alternative investments should be really thought about as a spectrum.
And I know if you talk to most average people about alternative investments, their hackles will go up and the hairs on the back of their neck will stand up because their view is that it’s a high risk, high return type of deal.
But what I want to emphasise today is that alternative investment is quite a broad term and there are lots of buckets of strategies. And within those buckets of strategies are varying degrees of risk-return.
Now, at one end of the spectrum, you can have all sorts of hair-raising crazy alternative investments, which include things like venture capital, and seed capital startups and they’re still investments but that is the high-risk, high octane end of the spectrum and there are lots of other strategies that sit in there as well.
At the other end of the spectrum, there are alternative investments which in my world are pretty boring in some cases, very bread and butter, offer solid cash flow, but significantly lower risk than even your traditional property or shares, which you might acquire for a buy and hold, partly because they don’t require a rising market.
So if you think about alternative investments as a spectrum, I definitely sit down on one end, which is the super conservative and I like deals that are backed by real property.
So I just wanted to clarify that because definitely in that scene in undercover billionaire, what Grant Cardone illustrated beautifully is that if you are creating around the way that a deal is structured, not only can it still be relatively safe, but you can also participate as an investor with a very low level of capital and get a very amplified return, which is really what alternative investing is really all about, from my perspective.
Once again, I love his swag and he’s such a character. And I love that, to some degree, he really hands that up for the camera.
Leveraging Your Network
What I want to talk about specifically in terms of lessons is, first of all, no one in the barbershop wanted to do the deal, which at the time, I could see he was totally gutted about, especially because he’s Grant Cardone.
And he’s not used to having people say no, they don’t want to put money into his deals. Obviously, he was pretending to be someone else. But the second thing is I want to pull apart why me personally if I had been someone in that room, I too would not have invested.
I want to really dissect why he probably had no success and maybe at the time, he was quite emotional because he had this deadline that he had to make this million-dollar business in 90 days from zero and I think he got given $100 when he landed.
What was awesome about the whole series was it articulates really clearly that smart thinkers like Grant Cardone recognise that if you want to go from zero to a seven, eight-figure business really fast, you need to leverage your network.
Definitely, in my own experience, leveraging into better networks was the thing that gave me not just a 1% change in trajectory but a huge change in trajectory in terms of shaving years off my timeline to financial freedom and giving me exponential results.
So Grant Cardone went in, the first thing he’s doing is like, “Who are the movers and shakers in town? Who do I need to be in a relationship with to make deals?” So that was a signing-off.
That was a fabulous lesson for anyone who might have missed that. The way that a billionaire thinks in terms of starting from zero is really different to what the average Joe might have done.
Which might have been to just go and get a job somewhere to just put food on the table and make a living and people like Grant don’t think that way. They’re like “Let’s cut the crap and let’s get a big result in the shortest possible time.
Be Mindful Before Taking a Deal
The next lesson that I want to showcase here is that the reason I wouldn’t have gone into the deal that he showcases in the barbershop is that he’d found an apartment building and it was a really prominent building in town.
The deal was worth 10 million and he was asking these barbers to chip in $20,000 grand each to create a $200,000 deposit so he could secure the deal and give himself a period to go and do good due diligence.
But he would have still then at some point needed to come up with a $2 million deposit to secure the deal and go to the bank to get the balance.
It’s a great deal. He was talking about how much cash flow the deal would be earning, he was talking about this $10 million dollar deal, there was going to be about $140,000 in net cash flow that they could improve as they renovated so it was a good deal.
And he showed that from a $2 million investment that over a period of a few years, they would make about $6 million.
So it was a no-brainer from the mechanic’s point of view. But I think that there were a few missing pieces for me in the way this deal was presented and so ultimately nobody put their hand up.
People started to ask questions “Well how is this gonna work? What is the structure going to be? Do we own it? Or do you own it?”
They were asking questions about returns and what Grant did a great job of is taking this big deal and explaining it all and then just saying, “Who wants in?”
The mistake I think he made is he glossed over the details and he didn’t talk about what when, where, how, the sort of liquidity, how would people get out if they want it out, how was he planning to fund the renos – there was no project plan; there was no deal sheet.
Usually what happens with these professionals who are in this case is putting together syndication and you would have a private placement memorandum, which outlines exactly how the deal works.
What if things go wrong? What is the project plan? How are things going to map out over a period of time? And so he didn’t really have any of that, let alone just the detailed document. He didn’t even have a high-level summary that you could hand out.
He basically handed out cards and said, “Are you in? Are you out?” So look, he had limited time, money and resources, so I get why he did what he did.
But that would have been the number one – like people need to know the details. Some people need to know the detail. Occasionally, you’ll come across investors who will go, “Yep, back of the envelope, it works. I’m in.”
Know, Like and Trust is a Must in Alternative Investing
But that leads me to my second key lesson which is that to invest in any project, particularly in the alternative space, you need to have know, like and trust. And there’s absolutely no way that you can do that after one meeting.
So what happened was, the meeting was held at a barbershop, wherein the previous week he’d gone and had a haircut and he had given the guy a good tip.
So the guy was feeling warm enough to him to organise a bunch of other business owners to come in and listen to Grant’s pitch.
But the problem is, you cannot expect to build know, like and trust from such a small amount of interaction. Don’t get me wrong, he did a fantastic job of pre-framing, expressing what the deal was, and explaining at a high level how the deal was going to work.
First thing is, it’s really hard to trust someone. Someone asked him question like, “How much money have you got in the deal?” And the answer was he had no skin in the game. He was really taking on responsibility for pulling the deal together but he was asking everybody else to front the cash.
Now, if you’re someone who’s a very experienced deal maker and you’re going to other people for capital and almost as a favour potentially letting them participate in the deal and that’s what I’ve seen before, you can kind of skip through that know, like and trust if it comes through referrals or whatever.
But in this instance, it’s hard to trust someone no matter how good a salesperson they are with no research, even if you know the market.
These guys who were in the barbershop knew that market, but they had no idea about his track record and really, all he said was, “I know real estate, trust me, I need you to front $2 million eventually to make this deal work.” I can see that that was a tough sell, no matter how epic that deal was.
And then what he highlighted in that two or three-minute segment is that he is an awesome salesperson. So if you are pitching any kind of sales presentation, product, anything, I think it would be hard to beat him. You know, he even says that, like I could outsell anyone, which is awesome.
But there’s a huge difference between understanding at a high level that you know how to describe a deal and you can sell it, and being a practitioner. And as an investor, you need to know the difference.
The Biggest Pitfalls With Property Investing
I think one of the big pitfalls that people have when they come to property investing especially, is every man and their dog is a self-proclaimed guru around the property now and it’s hard to distinguish those that actually legitimately know what they’re talking about and those that don’t.
This is where marketing and sales kind of blurs with facts or history or track record. Some people are just so good at selling, that in itself will get the majority of people over the line from a sales perspective,
I’m really encouraging and I’m really passionate about this idea of needing to pull those two things apart. Just because somebody has a great ability to sell and the market doesn’t necessarily make them a good practitioner.
And as an investor, you need to know the difference. From my perspective, Grant did a fabulous job and he’s a great sales guy.
What he sort of inadvertently revealed, though was that he didn’t really know much about the detail. He’s used to having this army of people behind him that can answer all the questions about the nitty-gritty.
So I think what I saw is he’s a little out of touch with answering the detailed questions that people want to know. Every investor is different. Some people just need high-level numbers. Other people want to know more about structure.
Other people want to know the nitty-gritty of the project plan and the really talented, trusted advisors and dealmakers know that they’ve got to cater to all of those different kinds of investors, and Grant certainly didn’t do that in this in this episode.
The other thing that I really felt for him was he chose a deal where clearly, the deal was time-sensitive. When you’re getting to know a strategy or a person or a style of investing, the last thing you want is to be put under any kind of time pressure.
And again, I really feel for investors today because number one, good deals are hard to come by. So when you do get a good deal that comes across your desk, often people are telling you you’ve got to make an investment decision super fast.
And we all know that that’s the worst situation to be in; you feel under pressure. You feel it’s a good deal or someone’s telling you it’s a good deal. Maybe you understand it, maybe you don’t. Maybe you’ve done really good due diligence, maybe you haven’t.
But I think the bottom line is that I’m from the school of thought, which means do your homework, feel comfortable with the strategy, how it works, how it’s structured, be comfortable with the deal maker, who they are, how they work, their track record, be comfortable with how the deal is structured, what is your liquidity, how are they going to communicate all those deal those details.
And then when you are ready to pull the trigger, and the right opportunity comes along, you can make decisions quickly.
One of the Mistakes Many Investors Make
The point I’m trying to make is there’s a good deal every day of the week and I think one of the mistakes that many investors make is thinking that those good deals that come along are never going to be repeated.
Are good deals are hard to find? Particularly in a local market that maybe you fully feel comfortable and understand? Yes, those deals are hard to find. It’s really easy to get swept up in the need for urgent decision making.
But what I would also encourage you to consider is that short thinking and spontaneous decision making with very little to back it, can often land you in hot water.
Final Thoughts
So guys, just to round this particular episode out, it was a super fun thing to watch Grant Cardone. It was a tough situation but he certainly showed that he’s someone who has great grit, determination and resilience.
The lessons that I wanted to share with you today are less about him and more about what you need to be thinking about if you really want to have a really successful path to financial freedom if you want to avoid mistakes, and if you want to align with people who you know like and trust.
If you’re a business owner feeling frustrated that despite doing everything right in the property investing playbook and you’re no closer to financial freedom, then head over to www.inkosiwealth.com to learn more about how you can use alternative investments to catapult your investing income and blend strategies to shave decades off your timeline to financial freedom.
If you’re interested in understanding how to create wealth through alternative strategies, please check out my programs, where I help you catapult your investment income and blend strategies to shave decades off your timeline to financial freedom. Or, you’re welcome to get in touch today, book a call with me, and I would be happy to talk you through it – no obligation!