Warren Buffett says real estate is a poor investment: Why he’s wrong

Considering he’s a multi-time millionaire, it’s safe to say that Warren Buffett knows a lot about being a successful investor. We have made a name for ourselves by identifying quality businesses in which to invest our money.

But one investment Buffett has long avoided is physical real estate. Looking at Buffett’s holdings, it’s hard to tell how many income properties there are. In fact, Buffett has long said he doesn’t think buying real estate is a good investment. He’s certainly entitled to his opinion, but he may want to take a different route in the process of building his portfolio.

While real estate may work for you

Buffett doesn’t like investing money in real estate because he finds it difficult to make money in it. However, real estate investing has many benefits.

House with large front lawn and walkway.

Image Source: Getty Images.

First of all, owning a rental property is a great way to generate passive income. And if you want that income to be truly passive, outsource the maintenance of your rental home to a property manager who can handle the heavy lifting involved, from renewing leases to checking for snow removal after a storm. can do.

Second, buying physical properties is a great way to diversify your investment portfolio. If you’re currently into equities, real estate gives you exposure to another sector or market. And that can be huge during periods when stocks are underperforming.

Stock and real estate markets do not always move up and down in tandem. Let’s look at what happened in the last seven months or so. House prices soared while stock prices fell. So owning an income property gives you considerable protection in that regard.

Additionally, home values ​​tend to rise naturally over time. Now, one rule Mr. Buffett claims investors should stick to is to hold on to their investments for years instead of trying to get rich quickly. If you’re willing to keep it for a long time, you may find yourself making a huge profit when you’re ready to sell.

follow a unique investment path

There is nothing wrong with getting investment advice from Warren Buffett. But that doesn’t mean you have to take the exact same approach he took.

Buffett may not be attracted to physical real estate, or even think it’s a poor investment. But if you feel different, that’s reason enough to give it a try.

Also, remember that if you are interested in investing in real estate but are unsure whether to invest in real real estate, you can always add a real estate investment trust (REIT) to your portfolio instead. Owning a publicly traded REIT is similar to owning a stock, but only in this way can you gain exposure to the real estate market.

Additionally, REITs are known to pay higher than average dividends. And reinvesting those payments is another great way to grow a lot of wealth over time.

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