BiggerPockets

Using Warren Buffett's Principles for Real Estate Investors

Wednesday, January 13

 From my blog at MaclennanInvestments.com:

View Your Investment as Ownership of a Business

Warren Buffett writes in his 2008 letter to Berkshire Hathaway owners:

We like buying underpriced securities, but we like buying fairly-priced operating businesses even more.

In his 2007 letter to investors Buffett writes:

Charlie and I look for companies that have a) a business we understand; b) favorable long-term economics; c) able and trustworthy management; and d) a sensible price tag. We like to buy the whole business or, if management is our partner, at least 80%. When control-type purchases of quality aren’t available, though, we are also happy to simply buy small portions of great businesses by way of stockmarket purchases. It’s better to have a part interest in the Hope Diamond than to own all of a rhinestone.

A real estate investor must realize that they are buying a business when they buy rental property. Businesses must market and sell a product to customers that are ready, willing, and able to buy in order to make a profit.

 

Comments

1. 

   Michael Zuber Reply
   about 2 years ago

   Nice, One Buffett quote I like best with Real Estate is "He likes to buy stocks or companies with a large margin of safety"

   Kind of like buying cash flow houses for land value ...

2. 

   Bryan Hancock Reply
   4 months ago

   Buffett's shareholder letters are some of the best reads out there.

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