Warren Buffett is known world all over for his investments in the stock market. He invests in vibrant companies, which have a huge turnover. The trick to his investment strategy is buying stocks in these companies at the right price. The right price matters a lot in stock investments. What is little known to many people is that Warren Buffett has investment interests in the real estate. He revealed this information through the annual letter to shareholders of Berkshire Hathaway where he is the CEO.
Warren Buffett revealed he has a 400-acre farm he bought in Nebraska. He also has a retail property in New York. His entrance into the real estate industry has taught him a number of lessons. Buffett has some lessons for people who would like to invest in the real estate industry. Just as in the stock investment industry, the same principles apply in this industry too.
The number one rule of investment is buying undervalued property. Buffett bought the farm in Nebraska at a time when land prices had plummeted following a bubble burst that had earlier been created by the fear that there would be inflation. The prices of farms in the area went up but then came down drastically after the inflation failed. He bought a 400-acre farm at $280,000, a price that was considerably less than what would have been expected in a normal situation. The same thing happened with the New York retail.
According to Warren Buffett, it is good to focus on the income rather than appreciation. With his properties, he focused on what the property would give him rather than the daily valuation of the property. Buffett says that a player should concentrate on the game and not on the scoreboard. The hallmark of investing in real estate is investing in underpriced property.