Many years ago, I read the book The Snowball: Warren Buffett and the Business of Life.
Even if you haven’t read this book, it’s not hard to learn Buffet’s approach to investing because he is frequently quoted in the media. Buffett believes trying to time the stock market is “a waste of time and hazardous to investment success.”
Buffett’s strategy is to evaluate a company based on its own merits and pay no attention to the direction of the stock market. “If you’re right about the businesses, you’ll end up doing fine.” Buffett has further been quoted as saying “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” His general philosophy is to buy good companies and hold on to them.
What does this have to do with real estate? Everything.
I have personally purchased one property each year since 2016. The only property I sold is my personal residence when we downsized to a smaller home this year. All the other properties in our portfolio were purchased with the intent of keeping them. Each property was selected because of its location and solid rental potential.
Many buyers whom I have spoken with recently have told me they are “waiting for the real estate market to cool off.”
I find this an interesting philosophy, especially since I have been selling real estate in Park City for 18 years. I was in business during the real estate downturn 13 years ago. During that time, there was a different buyer fear. Buyers back then were waiting for the real estate market to hit bottom. There was a fear of not buying low enough, fear of overpaying and missing the bottom of the market. Many people I worked with waited too long and missed the bottom. There are clients I worked with just one year ago who are now priced out of the Park City real estate market.
If Warren Buffett cannot time the stock market then do you really think you can time the real estate market? Why not apply Buffett’s approach to real estate and buy solid properties that you will hold over time?
2 Comments
Has it been your experience that the price of rent goes up when the price of real estate goes up?
Yes. When the price of real estate is high, many people are unable to afford to purchase and turn into renters. This creates demand for rentals and pushes up prices.