Grant Cardone has a side hustle going on with Fundwise Capital LLC of Sandy, Utah. In exchange for a cut of the action on lines of credit and loans made by Fundwise, Grant Cardone provides a landing page for Fundwise on his grantcardone.com website.
Fundwise looks for “referral partners” that 1) Are selling entrepreneurial “How to Get Rich” coaching services and have a large online presence, and 2) have social media followers who want to be entrepreneurs, who want to get rich, but need to borrow capital to invest in the things recommended by their gurus like Grant Cardone.
Why is Grant Cardone — who talks a big game — paddling around in an inflatable wading pool as an online affiliate of Fundrise Capital? We personally expect more from a guy who flies around in a Gulfstream 500.
This begs an even larger question: Why does Cardone put 30% down to buy a property and then borrow the 70% balance? It makes no sense to do a Reg D offering for a 30% down payment on a property when one can just as easily do a Reg D for the entire purchase price plus the costs of improvements.
Why doesn’t Cardone do one $800 milllion Reg D offering to pay off his existing loans and wipe out his ~4% monthly interest expense? ~4% monthly on $640 million is a very large amount of money he could keep for Cardone Capital instead of paying it to his lenders. We have no idea why Cardone stays 70-80% leveraged on his AUM when he could take it all in house on a big Reg D offering. We see Cardone’s commitment to 60-80% leverage (debt) in his recent Reg A circular:
Given his claimed gigantic social media presence, why doesn’t Grant Cardone 47X his game and follow his fellow Scientologist David Gentile of GPB Capital into the world of Reg D offerings and invest in the monster private equity market? Davide Scigliuzzo of Bloomberg reported last month on the breathtaking size of this market:
Private lenders had $769 billion of assets under management as of the middle of last year, according to data provider Preqin. That growth is coming as the volume of loans that banks help put together for junk-rated companies, known as leveraged financing, has fallen about 17 percent this year, according to Bloomberg’s tally of new U.S. deals, in part because of private loans.
“The private credit market has grown exponentially over the last 10 years,” said Steven Ellis, co-head of the private credit group at law firm Proskauer Rose. “The beauty contests for deals have become more crowded as there is pressure from investors to put the money to work and, with the larger funds, write bigger checks.”
$800 million in apartment buildings that are 80% leveraged is just not that impressive in the big scheme of things, particularly when compared to private lenders having $769 billion AUM that are secured by collateral in real estate and other assets. With a certain percentage of defaults secured by real estate, private lenders will eventually own far more real estate than Grant Cardone can ever dream of owning; this is simply statistical inevitably at work in a $769 billion dollar private lending market.
As we have said before, Cardone appears to be carrying $640 million in debt (less whatever he has paid off to his lenders on monthly payments) at what we estimate to be ~4% interest. It gets worse if he has to do commercial real estate loans at Prime + 1%. Given his debt load, Cardone told social media that he paid $50 million in cash for his new Gulfstream 550. Why would anyone let go of $50 million in cash to buy a jet instead of financing it? That $50 million could have paid for an apartment building that offered immediate 100% cash flow. This new cash flow could easily make the monthly payments on a jet — and the payments on the jet would be deducted as a business expense.
Cardone’s recent Reg A circular states that in the past ten years Grant Cardone “the Manager” purchased four properties with outside investors for $56 million. These properties have 1,207 rental units:
With $56 million invested, the average price Cardone paid for these 1,207 rental units was $46,396 each. By paying $50 million in cash for his new jet, Cardone walked away from purchasing 1,077 income-producing rental units at the same per unit cost. And yet Mr. Gulfstream 550 is piddling around with this Fundwise online affiliate stuff.
Fundwise charges a hefty 9% origination fee on a line of credit. The interest rate is 0% for 9-15 months. If the money borrowed isn’t paid in that time frame the interest rates jump to credit card rates of 12-24% annually:
Fundwise’s rates on installment loans are also in credit card territory:
Cardone gets a commission for people who go to Fundwise from the Cardone landing page and take out a line of credit or a loan. This is an income stream for Cardone but how much? $25,000 a month? That is what Fundwise said its biggest affiliate makes. If this is Cardone, then he would make $300,000 a year from Fundwise. This would pay for 10% of the $3 million dollar a year upkeep on his new jet. Cardone stated this $3 million number in a video and it is not our number.
The Cardone Capital website boasts that the company will soon have $1.2 billion AUM. In our view it cheapens the Cardone brand to have a $300,000 side hustle as an online affiliate of a much smaller company. It raises questions about cash flow and makes one wonder if Cardone Capital is fishing around in the sofa cushions for loose change. If Grant wanted to burnish his image and make a lot more money than hustling online loans as an affiliate, he would offer a Cardone Capital Visa card. Please get serious about this matter Mr. Cardone. You’re not a starving college student anymore.
Fundwise wants to recruit Cardone’s followers to become Fundwise affiliates and go to work online selling loans. But in order to be great Fundwise salespeople and closers, and let us remember that coffee is only for closers, Cardone’s followers need to buy more and more Cardone University training materials. This stuff is not cheap! These four basic Cardone U training modules will set you back $4,480:
If one doesn’t have the money to pay for Cardone University sales courses then they can take out a loan from Fundwise Capital. Looks like one hand washes the other in Cardone World.
Fundwise appears to be a multilevel marketing program like Amway. In this case, Cardone earns “override commissions” on his his followers who become Fundwise affiliates. Cardone thus monetizes his followers further by building and cashing in on his Fundwise downline. But once again, this seems like a small game for a man who wants global conquest.
Fundwise’s founders — Leo Kanell, Corey Price, and Mitch Plowman — appear to be serious Cardone fanboys.
O/T: In this older GC video we see Grant doing a killer job of laying down the hammer on a young guy who couldn’t pay up on what he owed. The young guy should have gone to Fundwise Capital for a loan.
Categories: The Scientology Money Project