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Nearly 35 years ago, Warren Buffett, one of the world’s most successful investors, was lecturing at the University of Notre Dame when he recounted that president-elect Donald Trump had made his assets appear to be worth much more than they really were by locking in property loans at prices far higher than their true value.
It also meant he incurred significant and excessive debt to acquire them in the first place.
In recounting where and how Trump went astray in his business ventures, Buffett observed “the big problem with Donald Trump was he never went right.”
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While most Americans likely wouldn’t knowingly, or at least willingly, overpay for assets, it can happen. Fortunately, there are strategies to avoid falling into those traps – or to recover if you already have.
How to build your real estate portfolio the right way
In his lecture, Buffett also expressed his belief that “you really don’t need leverage in this world.”
However, if you’re drawn to the real estate market, some amount of leverage is often essential for most Americans, particularly those looking to buy a home. But ownership is far from your only option when it comes to investing in real estate.
Invest in residential real estate
Luckily, there are now several ways to tap into real estate without leveraging assets or taking on tons of debt.
For example, Arrived’s online platform allows you to invest in shares of rental homes and vacation rentals without taking on the responsibilities of property management.
With Arrived, you can browse a curated selection of homes, each vetted for their appreciation and income potential. Once you find a property you like, you can choose the number of shares you want to buy and start investing in real estate with just $100.
Another option is Lightstone DIRECT, which offers accredited investors access to institutional-quality multifamily and industrial real estate — with a minimum investment of $100,000.
Founded in 1986 by David Lichtenstein, Lightstone Group is one of the largest privately held real estate investment firms in the U.S., with more than $12 billion in assets under management.
Over nearly-four decades, their team has delivered strong, risk-adjusted performance across multiple market cycles — including a 27.5% historical net IRR and a 2.49x historical net equity multiple on realized investments since 2004.
With Lightstone DIRECT, you gain access to that proprietary deal flow.
Here’s the kicker: Lightstone invests at least 20% of its own capital in every deal — roughly four times the industry average. With its skin in the game, the firm ensures its interests are directly aligned with those of its investors.
Read More: Approaching retirement with no savings? Don’t panic, you're not alone. Here are 6 easy ways you can catch up (and fast)
Investing like Buffett
Given Buffett really isn’t a fan of taking on debt, perhaps it’s no surprise he’s made most of his money by investing in companies at cheap prices.
He once explained in a letter to his partners, “This is the cornerstone of our investment philosophy: Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results.”
While it’s hard to find anything inherently flawed with that logic, price isn’t everything. A low price tag might very well be indicative of a low quality investment.
If you want the inside scoop on which investments to make, consider signing up with Moby you’ll get access to the best investing research so that you can make a sound investment choice.
Moby’s insights are broken down into simple, easy-to-understand formats. They’re written by a team of former hedge fund analysts and financial experts who spend hundreds of hours weekly sifting through the latest financial news and data.
And the numbers don’t lie: Moby's picks have beaten the S&P 500’s returns by almost 12%, on average.
What to do if you are overleveraged
Before Trump’s political career began, Buffett also found fault with Trump’s strategy when it came to debt and loans. At his 1991 lecture, he estimated Trump owed “perhaps, $3.5 billion now, and, if you had to pick a figure as to the value of the assets, it might be more like $2.5 billion.”
To avoid similar pitfalls, securing a loan that accurately reflects the asset’s true value is critical for anyone looking to manage debt responsibly.
For those already paying off debt, Credible is a loans marketplace for personal loans from the top lenders. It’s designed to make it easier to find the best debt solution for your needs, all in one place.
And with Americans predicting a 14.2% chance of missing a minimum debt payment over the next three months, debt consolidation might be a focused way to get back on track.
Credible works with trusted lending partners to find you the best options for easy debt consolidation. Based on the details you provide, you can get matched with a loan of up to $100,000 with interest rates starting at 6.94%.
Make a plan with a pro you can trust
Buffett’s overarching message about Trump from his lectures was that the president-elect’s business foundations were shaky right from the start.
And he was indeed right. According to a report from the Associated Press, Judge Arthur Engoron ruled earlier this year in Trump’s civil fraud trial that he engaged in a yearslong conspiracy to deceive banks and insurers about the size of his wealth, and the true value of his properties.
To avoid winding up in a similar situation, a financial advisor can help you craft a solid investing strategy that even Buffett might approve of.
Advisor.com is a free matching service that helps you find a financial advisor who can collaborate with you to carve out your financial goals, matching you with only the best options for you.
From their database of thousands, you get a pre-screened financial advisor you can trust, and can set up a no-obligation consultation to get started.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
