Great price or great property?

Question

"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price." - Warren Buffett

Substitute "property" for "company."  Do you agree?  How have you applied this philosophy?

I used to be all about how much discount I could get off market price, but I've moved towards quality. Yes, I still love a bargain, but now I'd rather have a great property.  Still trying to digest paying market or above for it, though.

Jesse T. · Answer

I think the thing from Warren Buffet and stocks that applies a lot to investment properties is "a moat".  I think an investment property where something like it(or better at a similar price) can be built in the next year or two is a big risk.  This really applies more to location than property design/features - generally unique in buildings is bad.

Joshua D. · Answer

@Jon Klaus I would much rather own a well managed property in poor condition than a  beautiful house that is poorly managed...

I think this is the difference between the location/condition of a house compared to Warren Buffets quote about buying companies.

When I buy a company stock I am buying peoples time and management skills, the assets of the company may or may not be worth much.  It the leaders and people who work for him that are important.

I might be over thinking this a bit, but i just thought I would throw that out there.

Steve M. · Answer

Great Property ... hands down.

Quality of the tenant pool is everything to me.  I've been burned a bit too much on lower quality units and cheaper areas ~ and the headache alone, just isn't worth it to me.

I have a buddy who is the complete opposite.  He seems to thrive in area's like this.

Like all things ~ it comes down to the individual investor and what they are willing to do. Risk Tolerance plays a key role, as does whether or not you are willing to handle headache's on a daily basis :)

Jon Klaus · Answer

I was primarily thinking about location, rather than the improvements on the property.  Of course the home/units are important, but can be updated in any case.

Franklin Romine · Answer

Quality is only relevant to your reality.  A quality property could mean... stucco, new windows and roof.  This description of quality could be applied to a home built in 2010, 3/2, 1,600 sf, purchase price of $175K that rents for $1,350 per month.   That same description of quality describes a 1 bedroom home I own, paid $36K and rents for $650 per month to a nice old lady that has been collecting disability for +40 years.

Talking about market and above priced properties.... I would pay market or above price for properties that were long term hold if I had an excess supply of capital.

Marci Stein · Answer

Why choose? I like both.

Elizabeth Colegrove · Answer

I go for the rest property at the right price. If you can rent a cheap house out it doesn't matter how cheap it is because it's still a money out ;)

We decided when we got started that we would go with better properties with smaller margins ;) than not so great with awesome margins that couldn't be realizedrealized

Peter MacKercher · Answer

I absolutely agree with the mindset, but you don't always have the money to go buy the good property. Sometimes you have to buy the run-down mess and make it good to get your profit. The bonus of that: Knowing how to put lipstick on a pig means you know how to give some shine to gems that need just a bit of love.

Roy N. · Answer

Jon:

I'm all about quality at a fair price ... though these days what we are mostly encountering are pigs at silly prices or quality properties at ridiculous prices.