Warren Buffett Says Real Estate Is A Bad Investment: Why He’s Wrong
Considering he’s a multi-billionaire, it’s fair to say that Warren Buffett knows a lot about being a successful investor. After all, he made a name for himself by identifying quality companies to invest his money in.
But one investment that Buffett has long avoided is physical real estate. If you look at Buffett’s holdings, you won’t see a slew of income properties. In fact, Buffett has long said that he doesn’t consider buying properties a good investment. While he’s certainly entitled to that opinion, you may want to take a different route when building your portfolio.
Although real estate may work for you
Buffett doesn’t like investing in real estate because he thinks it’s hard to make money there. But investing in real estate offers many advantages.
First of all, owning a rental property is a great way to generate passive income. And if you want that income to be passive in the truest sense, you can outsource the maintenance of your rental home to a property manager who can handle the legwork, from renewing leases to clearing snow after a storm.
Second, buying physical real estate is a great way to diversify your investment portfolio. If you are currently stock-heavy, real estate gives you exposure to a different sector and market. And that could be huge during times when stocks are underperforming.
The stock market and the real estate market don’t always go up and down together. Take a look at the events of the past seven months or so. As stock values plummeted, home values soared. And so owning income properties gives you good protection in this regard.
Also, home values have a natural tendency to increase over time. Now, Buffett insists investors should stick to a rule of holding their investments for many years rather than trying to get rich quick. And so, if you’re willing to hold an income property for many years, you may find that once you’re ready to sell it, you’re looking at a pretty good gain.
Start on your own investment journey
There’s nothing wrong with following Warren Buffett’s investment advice. But that doesn’t mean you have to take the exact same approach.
Buffett may not feel attracted to physical real estate, and he might even think it’s a lousy investment. But if you feel differently, that’s reason enough to try.
Also keep in mind that if you’re interested in investing in real estate but aren’t sure you want to stock up on physical properties, you can always add real estate investment trusts (REITs) to your portfolio at the place. Owning publicly traded REITs is similar to owning stocks, but this way you get some exposure to the real estate market.
Additionally, REITs are known to pay above-average dividends. And reinvesting those payments is another great way to build a lot of wealth over time.