Warren Buffett Why not real estate investment?

[collegeinvestor]

Hello,

I was wondering why you guys think that Warren Buffett has never invested in REIT for berkshire hathaway to the best of my knowledge or even apartment complexes, hotels, office properties etc? thanks for the help.

[collegeinvestor]

I know he owns clayton homes (and the mortgage portfolio they own) as well as the RV manufacturer but why not straight real estate investment? I remember at one annual meeting he said something to the effect that "we don't understand real estate" or something along those lines.

[twacowfca]

WEB understands RE very well, but RE isn't always a bargain.  However, 10 years ago he bought many RE cos for his personal account.  Also, the stock tip in his wallet that was auctioned a few years ago was for a REIT.  A co that is about to be or in the process of being converted into a REIT is practically a sure thing to appreciate in price because the dividend rate will be much higher than the maximum possible rate before the conversion.

[goldendad]

Hello,

I was wondering why you guys think that Warren Buffett has never invested in REIT for berkshire hathaway to the best of my knowledge or even apartment complexes, hotels, office properties etc? thanks for the help.

Well, he did recommend FR at one point.

[Guest Bronco]

He'll come out and tell you they have no intellectual edge on buying RE.  I think it is that simple. 

[collegeinvestor]

I think I will change my question. Why do you think he has't included in his circle of competence real estate investment in general? Do you think there is something fundamental about real estate economics that he doesn't like?

[Myth465]

I think I will change my question. Why do you think he has't included in his circle of competence real estate investment in general? Do you think there is something fundamental about real estate economics that he doesn't like?

 

LOL who said it wasnt in his circle of competence. The guy bought a farm  at like 14. He just doesnt like the price.

[Myth465]

I think I will change my question. Why do you think he has't included in his circle of competence real estate investment in general? Do you think there is something fundamental about real estate economics that he doesn't like?

 

I believe when asked about RE, Charlie Munger remarked that you only get adequate returns if you use large amounts of leverage.  So it might be the requirement of leverage that turns them off.

 

P.S. - Munger initially made his fortune in RE and his law firm, Munger Tolles and Olson, was originally formed as a law firm that specializes in real estate.  So it is well within their circles of competence.

 

This is actually what turned me off from RE. You really dont earn much without the 5x - 9x leverage.

[Guest Bronco]

Can you imagine Warren Buffett, with all that he does, spending additional time looking at real estate deals, becoming Barry Sternlicht in his spare time?

 

The dude is awesome and all but I haven't seen a cape.

[ubuy2wron]

I believe BRK has had at times some very substantial RE investments. my extremely fragile memory recalls that he has been a significant shareholder of one of the largest office properties REITS in the past I think it was vornado.

[Rabbitisrich]

Berkshire's size is probably a main limiting factor. Multi-billion dollar properties tend to attract competitors with access to low cost non-recourse debt and the willingness to reinvest huge sums.