Real Estate

How To Get Rich In Real Estate Like Warren Buffet

Amanda SchillerWednesday 28 July 2021

Warren Buffet is often considered one the of most successful investors of all time. The “Oracle of Omaha” is one of the few investors that was ever able to outperform the S&P 500 for decades at a time. Since he started investing, his company Berkshire Hathaway has achieved an amazing 20% annual rate of return.This is just part of the reason why, when Warren starts speaking, people quickly stop talking and listen.

Due to Warren’s own success, people want to know as much as possible about his thought process when it comes to investing. By incorporating his beliefs and processes, they hope to come a little bit closer to replicating his success.

This article will take a quick look at Warren Buffet’s approach to real estate and how you can use it to your advantage.

Warren Buffet’s take on real estate

Warren Buffet very famously doesn’t invest in anything that he doesn’t understand. This is one of the very few criticisms of him over the years. It was this mentality that caused him to largely miss out on the tremendous returns of several internet companies during the early 2000s.

For the most part, investing in private real estate falls into the category of things that Warren doesn’t feel that he fully understands. For this reason, he has stayed away from investing in private real estate for most of his career.

However, there are still plenty of Warren Buffetisms that we can take a look at that that will apply to investing in private real estate. Here are three of Warren’s favorite euphemisms when it comes to investing.

  1. Great value at a good price – Warren feels that the price of an asset is what you pay for it, however, value is ultimately what you get. When analyzing real estate investments, be sure to compare the underlying value of the asset to make sure that it aligns with the price that you are about to pay. If you feel the price is too high then you’ve got a red flag but if you feel the price is too low then you’ve got an opportunity.
  1. Do the math – There are no shortcuts when it comes to investing and taking the time to actually do the math before investing is a crucial step, regardless of the asset. For real estate, this means forecasting your projected income to make sure that it will be higher than your expected expenses.
  1. Don’t make investing more complicated than it is – Investing can sometimes be made out to seem like it’s the financial equivalent of trying to land a rocket on the moon. At its core, investing is incredibly simple. With real estate, you want to buy a property that makes you money and will increase in value. Don’t make things more difficult than they need to be.

Even though Warren doesn’t really invest in private real estate, there is still one way that he exposes his portfolio to the benefits of owning real estate. Let’s take a look at what that is.

Gaining exposure through a REIT

 If you are not familiar, a REIT is a Real Estate Investment Trust. This is essentially a business entity whose main source of income is from owning and renting/leasing income-producing property. REITs have shares of stock that can be bought and sold (just like a public company) and they are required to pay out approximately 90% of their income to shareholders each month.

REITs are a great way to expose your portfolio to the benefits of real estate and they are also much, much easier to purchase. The process of buying a REIT is as simple as opening a brokerage account and buying a few shares of stock. When it comes to this, there are two REITs that Warren Buffet prefers over others:

  1. STORE Capital
  2. Seritage Growth Properties

By investing in either of these two REITs, you can expect to receive a monthly payment depending on how many shares of stock you own. You can also expect these shares to fluctuate in value, depending on the success (or lack thereof) of their properties.

We hope that you have found this article valuable when it comes to learning how you can get rich in real estate like Warren Buffet. If you are interested in learning more, please subscribe below to get alerted of new articles as we write them!

 are then required to take this income and redistribute

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