What lessons can average real estate investors take away from Berkshire Hathaway’s latest shareholder meeting?
Berkshire Hathaway held their 2014 Annual Meeting in early May this year. New financial statements released for the first quarter and five hours of shareholder questioning of Warren Buffett and Charlie Munger have provided the media with a lot of content to speculate on. But what are the specific takeaways that real estate investors should focus on to build their own wealth?
1. Focus on Individual Opportunities
At the 2014 annual Berkshire Hathaway meeting, Warren Buffett firmly reminded investors not to be swayed by the media, or hype over general locations, but to hone in on individual investment opportunities and to evaluate them on their specific merits. In others words, there are great real estate investments to be found from San Diego to Connecticut, but not every home, even in the hottest markets, is a good deal.
2. Diversify
Berkshire is one of the largest conglomerates in the world. Many of today’s real estate investors may aspire to meet Warren Buffett’s level of wealth, but perhaps not to the hectic and extreme diversity of Berkshire. Still, it is clear that there are major advantages to branching out. Diversification can keep income consistent, maximize returns and lower risk. Consider the benefits of investing in more properties, and advancing into complimentary businesses and services.
3. Real Estate & Finance are Trending
While Berkshire’s overall performance was pretty lackluster in the first quarter of 2014, real estate pulled it all through. In fact, housing and finance showed a massive 62% increase in earnings for Berkshire Hathaway from January through March 31, 2014. It’s no wonder Buffett has been bulking up on real estate and mortgage debt in his portfolios.
4. Size Matters
Even legendary investor Warren Buffett isn’t immune to making mistakes, market fluctuations or everyday risks of lawsuits. However, he has proven that by going bigger and diversifying you can ride out virtually any issue. In fact, BH’s mass has helped it minimize or dispel risk and maximize returns in a way smaller players never could. For the average investor, this suggests partnering up, scaling and taking it to the next level could exponentially increase results, wealth and income.
5. Partner Up
Berkshire and Buffett haven’t been fans of partnering up in the past. But a new arrangement with 3G Capital has reportedly forged a new model which could be used to take down even larger investments. So no matter how big your portfolio or bank account is, there can be benefits of partnering on deals. Subsequently, it always pays to be flexible and adapt to the times, even if you are one of the largest forces in the market.
6. Go Long
Sophisticated real estate investors take the long term approach. Buffett has a trend in buying ‘100 year’ businesses. At the 2014 annual shareholder meeting, he was blunt on no dividends being paid out. His strategy is long term growth, not fast cash. Fortunately, direct real estate investing can deliver both, but don’t take your eye off the future.
