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Learnings and Strategies from Warren Buffett to Apply in Property Investment

strategy for investment

The real estate investment forum is a sort of bubble that new investors try to burst into. Things might not seem so easy at first but with gradual support and guidance, even the most crooked alleys of investment seem to start getting cleared off. But again, there might be various instances where real estate and equity investments pose different sets of challenges at various given times. 

Here below, we have tried to bring you a brief look at the investment tips and strategies stated by Warren Buffet from where you can draw inspiration to apply it in your parallel property. You will be getting an idea of the best investment approaches that hold the truth in the modern-day investment scenarios and how well they can pay you off in the near future. So here are the best ideas and tips right from the investment maestro Warren Buffett that will help you understand things better.

Warren Buffett has always sought after value and he preferred to pursue value for longer terms. He held onto the investments for a pretty long time but don’t these strategies look more ideal to be theoretical? Here, we will dig deeper into these strategies to understand how true they hold in our present investment scenarios.

Modelling and moving with times

Warren Buffett got the most major of his investment values and tips from his investor mentor Benjamin Graham. He was the personality who espoused the theory that involved buying shares in a typical company at a margin of safety that would entirely maintain its intrinsic value. In short, Graham was a person who looked at the companies that were not in their best phases or had fallen upon their hardest times. He also looked forward to seeking the companies that were trading their shares at a very significant discount to book their net assets or the profit values.

His theories marked that even if the companies are in a state of getting liquidated, the investors must still be in a position to book their profits and their positive results. This strategy is known as the “cigar-butt” strategy of investment where the investor hopes to get that one last puff of the cigar before the smoke dies out of that ailing asset. Buffett was a genius to learn this great skill from his mentor and got the foresight and confidence to remodel and apply it in his own truest senses. 

He still considers the margin of safety carefully but has moved away from price-to-book aspects. He is placing more emphasis on the future growth prospects of the investments. He stated, “Time is the friend of the great company and the enemy of the mediocre.” This helps the new investors learn the greatest tip from Buffett, to move in tune with the shifting landscape of the investment scenery.

Focusing on quality

Buffett has always focused on quality and that is quite predominant in the property approaches that he had been associated with so far. He did not lose out on time trying to dig deeper into smaller and lesser-known brands that had lesser potential to scale out the growth. Instead, he spent time in investments with global brands like Gillette, Coca Cola, Tesco, and IBM. IBM had been a market darer of the yesteryear and that did not stop Buffett. He waited for long before he could place out a multi-billion dollar bet on the same. He had been a personality who has been attracted to seek out franchise companies with near-monopolies in the market. These companies always had a steady flow of demand and nothing could replace them overnight. For property investors, he could be a lesson to stock up quality properties on quality suburbs that are continually growing and are having a hike in demand.

Being wary of dilution

Company remuneration reports are very important for Buffett. He disdains the companies that only run for the management’s benefit and that pay outlandish bonuses. In short, he keeps a close eye on the companies who go on issuing millions of options for stocks to the executive. These dilute the common stock and reduce the values that the investors hold. The value dilution of investment is indeed a great risk. This is how the property market shifts too. The population is shifting more towards smaller household sizes and hence established apartments are making investments in the suburbs. These lessen down the demand. The value of the area gradually dilutes. Investors need to keep their eyes open for such instances and bar from investing in those following areas.

Seeking sustainable growth

growth in property investment

Buffett has always prioritised companies that targeted sustainable growth really from within. There are investment options that show their growth apparently through acquisitions. Those can easily be differentiated by Buffett and his investments follow the paths likewise. This is a scenario lying in direct proportion with property investments. The last two decades observed structural shifts towards lower interest rates and that has led the households to borrow more funds than ever. There had been an explosion in credit and property prices. Properties are always a longer-term investment and are not a one-way bet. To have realistic hope and grip over the performance of the investments, you need to meet the sustainable households that are profit-yielding.

Besides these lessons, we get to receive 5 very important property investment tips from Warren Buffett. They help both new and seasoned investors equally if you know the right implementation. 

Here we are discussing the same below:

Risk comes from not knowing what you’re doing

It is of mere importance if you are investing in the properties or the stock market or the forex. What is important to know is what you are investing in rather than where you are investing. Your investments will always bring in positive results if you are having the right knowledge to go along with them. If it is the case that you are doing it seeing your friends, it is most likely not that valuable and great results won’t be coming your way. If you see a lot of your acquaintances buying properties in a certain area, maybe it is not wise for you to pursue the same. You must look for other profitable locations where the fight is not head-on. In that way, your investment will not be that risky and you will have ready profits in your hand in no time.

Someone is sitting in the shade today because someone planted a tree a long time ago

This is the best representation for property investments. Truly, real estate is not a place where you can make quick money. It requires patience and time. Wealth is created over time and you can reap the benefits only if you are patient and far-sighted enough. Profit through a real estate can be made by capital appreciation, cash flow, leveraging the fundamentals, and adding value. And all of these take good time and you will enjoy a pretty dense shade at the later halves of these investments.

Price is what you pay, value is what you get

Wise property investors will ultimately look at the end values they would receive and not calculate every penny they are giving in for. Investments that are educated and mapped will help bring value and as investors, that must be the primary goal. You can pour down funds initially but always look for avenues to make additions and alterations where the ultimate value will be rising.

Our favourite holding period is forever

Every seasoned investor would be agreeing to the fact that it is very foolish to sell off your investment properties if they are not performing right now. To maximise your gains to the most extreme levels, you need to be patient and hold onto your assets firmly. This will also help you lower down your taxes remarkably if you know how to. The risk will always be following you when you don’t know what you’re doing. You need to invest in yourself before investing in properties. You should get educated and learn how to run numbers. You will be able to maximise the profits and invest ideally.

If you don’t find a way to make money while you sleep you will work until you die

Property investments are the best way to make money while you sleep. It is another great source of your passive income and an alley to run into if you do not like your mainstream corporate job. Good investments will make good money for you silently without you even having to nudge it considerably. Greater efforts will show results in terms of greater results in some time.

Property investments aren’t any cakewalk and you need deeper knowledge to go with it. But once you catch the nerve of it, there is nothing more yielding than these investments. The lessons and tips from Warren Buffett are going to take you a step further with efficient investments henceforth.

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Fabrizio Cravero

Fabrizio Cravero

UK Property investor

Fabrizio在分享他從國外投資英國房地產的知識。 他基地在香港,每週為他的追隨者提供指導

Fabrizio Cravero

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