Perhaps one of the world’s wealthiest men and most accomplished entrepreneurs of our time, Warren Buffett, has essentially mastered the art of investing. To date, Buffett has had experience exploring nearly every type of investment, including real estate.
Buffett has found tremendous success in various asset classes with a combination of land, industrial and residential real estate investments along with other profitable business ventures of his own. His investments began early on in Omaha, Nebraska. From a very young age, Buffett’s interest in money-making was undeniable. He began selling soft drinks and delivering newspapers on a paper route until he had enough money to make his first investment in a piece of land that he rented out for a profit at the age of 14.
Investing in a few reasonable stocks in his late teens, Buffett quickly learned about the challenges and rewards of the stock market first hand. As he got older, his interest in investing and making money grew stronger. Taking the advice of his father, he attended college at the University of Pennsylvania, the University of Nebraska, and ultimately Columbia, where he studied value investing under Benjamin Graham and earned a graduate degree.
After founding Buffett Associates, Ltd. and purchasing his first house, Warren partnered with Charlie Munger to develop a seamless investment philosophy and ultimately purchase Berkshire Hathaway. Companies including American Express, Coca Cola and Gillette (along with many others) are among the well-managed and undervalued stocks that Buffett sought and still remain in the Berkshire Hathaway portfolio.
Despite a net worth in the billion-dollar range and the millions in charitable donations he has made to major organizations, Buffett has been described as frugal when it comes to his spending habits, and he continues to live humbly in the $31,000 home that he purchased for his family in 1958.
If you’re considering a real estate investment property, DWWWD — Do What Warren Would Do!
Make the right investments One of the defining things to take away from Buffett’s investment career is to buy undervalued assets. This is one of his signature tips when considering a real estate investment property. For example, Buffett purchased a 400 acre farm for less than $300,000 back in the ’80s. He really didn’t know much about farming but it was a deal and his son was interested in working the land. He also invested in a commercial building in NYC early in his career based on these same undervalued principles.
Another tip Buffett points out is buying real estate investment property based on income generation and not appreciation. The variety of ways to produce income can be numerous, like renting the property. With these two early investments, Buffett focused on these principles and he follows the same philosophy today. And he’s proved that you don’t have to be a billionaire or a rocket scientist to successfully purchase a real estate investment property.
Be smart and frugal It is important to realize that the two main keys to Buffett’s success are education and being smart with money. His father insisted he get a good education and he did that — and then some. This is the foundation for his investment success in today’s markets.
Another early philosophy that has paid off is saving — not wasting — money, which he believes a lot of people do today. Buffett uses his money very wisely and is a billionaire because of this. Another key is using leveraging to invest in real estate. This technique gives you the use of other people’s money based on expertise and financing at affordable interest rates. This can include using a bank to secure financing or having the expertise to manage large amounts of investments from others.
Smartland is Northeast Ohio’s largest real estate investment firm. Our team combines financial savvy with expertise in property management to help clients identify and invest in alternative investment vehicles that have strong growth potential.