Get free access to our world class MLS search tools, save your favorite listings, create saved searches & much more!

Buy Real Estate Like Warren Buffet!

Posted by Julie Wright on Tuesday, March 25th, 2014 at 12:56pm.

Invest in Real Estate Like Warren BuffetMost real estate investors follow the latest fads when determining what they will buy. They usually focus on short term gains rather than the overall big picture, and tend to buy in environments of economic euphoria rather than environments of economic doom and gloom. They go with the herd mentality.

Warren Buffet’s credentials as an investor need no explaining. And recently he shared the basis of his success with the shareholders of Berkshire Hathaway in his annual update letter. His strategies for investing are simple and easily followed for those that have the patience and persistence to carry them out.

In his letter to shareholders, he used the example of a farm he had purchased, even though he knew nothing about farming. But, by relying on the knowledge of experts in the field, he was able to make an informed purchase decision.

Here are four simple tenets to follow when making a real estate purchase decision:

  1. Look for undervalued real estate. Wait until the real estate bubble has burst rather than speculating with everyone else during a period of rapid expansion.

    From 1973 to 1981, the Midwest experienced an explosion in farm prices, caused by a widespread belief that runaway inflation was coming and fueled by the lending policies of small rural banks. Then the bubble burst, bringing price declines of 50% or more that devastated both leveraged farmers and their lenders.

    In 1986, I purchased a 400-acre farm, located 50 miles north of Omaha, from the FDIC. It cost me $280,000, considerably less than what a failed bank had lent against the farm a few years earlier.

  2. 2.       Find homes for sale that produce a solid income “as is.” Any property you purchase should be able to show value in the income it earns vs the price you paid for it. Future appreciation is for speculators. (And we all know how that can go in the long run.)

    With my investments, I thought only of what the properties would produce and cared not at all about their daily valuations. Games are won by players who focus on the playing field –- not by those whose eyes are glued to the scoreboard.

  3. Look for properties that are not earning what they could be earning if managed properly. Many real estate investments are poorly managed and operations could be streamlined to increase productivity by several percentage points.

    I calculated the normalized return from the farm to then be about 10%. I also thought it was likely that productivity would improve over time and that crop prices would move higher as well. Both expectations proved out.
  4. 4.       Look at the Macro (overall) picture rather than the micro (small) picture. If a property is producing solid returns, it doesn’t matter if the general real estate market goes up or down. Of course, if it does, that’s a nice added bonus. Look for property that will earn its keep no matter what is happening in the rest of the economy.

    My purchase was made in 1986. What the economy, interest rates, or the stock market might do in the years immediately following was of no importance to me in making those investments. I can't remember what the headlines or pundits were saying at the time. Whatever the chatter, corn would keep growing in Nebraska.

What does this mean for Las Vegas real estate investing? In the simplest of terms, whether you are buying commercial or residential real estate, make sure to look for property in areas where rents are likely to remain stable and in demand, no matter what else happens in the rest of the world. According the strategies of Warren Buffet, the “Flipping Las Vegas” mentality has no attraction for the serious real estate investor. The only people that make consistent money with that investing philosophy are the sharks promoting it to the innocents who buy their program.  

Can I say once again how excited we are to become Berkshire Hathaway HomeServices in Las Vegas at the end of April? We couldn’t ask for a better example to follow. (And obviously Warren thinks real estate companies themselves are an undervalued, underutilized investment since he bought 67% of Prudential’s real estate division!)

Read Warren Buffet's entire annual letter to Berkshire Hathaway shareholders

Mastura Roberts
(702) 919-5400
offers@greatlasvegashomes.com

Team Leader, The Tonnesen Team
Berkshire Hathaway HomeServices, Nevada
3185 St Rose Pkwy #100 Henderson, NV 89052

With over 30 years of experience helping families call Las Vegas "home!"



Related Blog Posts

15 crazy real estate myths your clients probably believe

People don’t know what they don’t know, and what they do know is enough to create false perceptions Key Takeaways         Erroneous assumptions about the business can cause a ton of confusion for the public about how the real estate process works. The real estat...

Las Vegas Among Top 8 Cities for People Who Hate to Pay Taxes!

April 15th is almost upon us, and if you are like most people, you are sitting hunched over your desk trying to find just one more deduction to claim before dropping your tax return in the mail. So if tax time has got you down, maybe you should consider moving and buying a home in Las Vegas. The following are excerpts...

New Construction of Las Vegas Homes

There is no denying that when you're house hunting, the allure of new construction in Las Vegas is undeniable. The Las Vegas Valley currently boasts dozens of builders with over 1079 floor plans to choose from. While the average price range runs in the mid $300Ks there are Las Vegas New Construction houses available...

FHA Cuts Mortgage Loan Limits for Las Vegas!

Urgent FHA Bulletin! On Friday December 6th HUD announced the new FHA loan limits for 2014 (Mortgagee Letter 2013-43) across the nation. For Clark County, the current single family loan limit of $400,000 has been reduced by more than 28% to $287,500 effective January 1, 2014.  This move is not unexpected - the FHA loa...

Explore 7885 Desert Willow Drive

Join us on a virtual tour of this beautiful home. 5 bedrooms, 3 bathrooms, gas fireplace in Master Suite, Pool and a Spa.     Learn more here at this link to this Great Las Vegas Home for Sale...

Leave a Comment

Have a Question?

Contact Us

Follow Us