Investing

Buffett's Real Estate Investment Offers Tips to Homeowners

Paul Ausick

Published: March 5, 2017 9:10 am

Last Updated: January 12, 2020 2:15 pm

It’s known colloquially as the Midas touch. That’s what Warren Buffett used to turn a $150,000 investment in 1971 into $11 million. In this case, the investment was made in a beach house in Laguna Beach, California.

Buffett, who is famous for his buy-and-hold-almost-forever investing style, paid the equivalent of $900,000 in 2017 dollars for the six-bedroom, six-and-a-half bath house, but even that’s a return of more than 1,000% over 46 years.

Buffett and his first wife bought the house primarily because she liked it. At the time, Laguna Beach was not the up-scale enclave it is currently, but it had potential, as they say. He told The Wall Street Journal that he is selling it now because his family no longer uses it much since his first wife’s death in 2004.

Lisa Mandell at Realtor.com examined both the purchase and the sale of Buffett’s beach house for some tips on a winning investment strategy.

Listen only to those you know and trust
Clearly the first Mrs. Buffett had an eye for a good buy and Mr. Buffett is not likely to have married a fool. Her recommendation was all that was necessary.

Know the difference between price and value
Though Buffett claims he didn’t think of the house as an investment, that seems a bit ingenuous. He didn’t just fall off the pumpkin truck from Omaha in 1971. Remember, $150,000 for a house in 1971 was real money.

Buy and hold (almost forever)
Time is the friend of a good investment and the enemy of a not-so-good one. And 46 years is a long time for a good investment to generate more value.

Buy something you want to own
His wife wanted the house as a vacation home, not so she or her husband could make a big score in Southern California real estate.

The house, originally built in 1936, comprises about 3,600 square feet of living space and has been through many remodels over the years that Buffett has owned the property.