What You Can Learn From Warren Buffett’s Real Estate Investments

By Dave Van Horn

Recently, an excerpt from Warren Buffett’s annual letter was released in advance (to be published in the March 17, 2014 issue of Fortune), and he tells of some investing principles he learned from modest real estate investments he made. Both examples could apply to almost any type of investing in general.

He purchased both properties after the real estate market had crashed. One was purchased from the FDIC, a farm in Nebraska he bought for his son, and the other was a retail space in New York City, right near NYU, that was purchased from the RTC. Isn’t it exciting to see good old Warren purchasing distressed debt from bank failures just like we do?

He goes on to say that he had no particular expertise in real estate investing but he thought both would be increasingly profitable. He was not buying either property expecting to sell at a higher price.  He only thought about what the properties would produce, not necessarily their current or future predicted valuations.  In other words, he was investing for cash flow and not capital gains.

Warren goes on to say, “Games are won by those who focus on the playing field-not by those whose eyes are glued to the scoreboard.”  He didn’t listen to the chatter in the marketplace, he just figured corn would continue to grow in Nebraska, and students would continue to enroll at NYU.  To sum it all up; ignore the chatter, keep costs minimal, and invest as you would in a farm.

Reprinted from Dave Van Horns Notebuyer’s Notebook

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