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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.”
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.
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.
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.
In September, the U.S. central bank started moving aggressively in this new direction and cut interest rates by 25 basis points (bps). Rates were cut by a further 0.025% in October and November.
Commercial real estate typically appreciates in value when interest rates drop because buyers can afford to pay more for assets at lower borrowing costs.
These days, you don’t need Trump-level debt or Buffett-level wealth to get involved in the $22.5 trillion commercial real estate market.
First National Realty Partners (FNRP) allows accredited investors to invest in institutional-quality commercial real estate.
FNRP’s team makes investing in commercial real estate convenient and simple by offering white-glove service to investors. They act as the deal leader, providing expertise and doing the legwork, while investors can use their secure platform to explore available deals, engage with experts and easily make an allocation.
FNRP has developed relationships with the nation’s largest essential-needs brands, including Kroger, Walmart and Whole Foods, and provides insights into the best properties both on and off-market while investors can passively collect distribution income.
Mogul is a real estate investment platform offering fractional ownership in blue-chip rental properties, which gives investors monthly rental income, real-time appreciation and tax benefits — without the need for a hefty down payment or 3 A.M. tenant calls.
Founded by former Goldman Sachs real estate investors, the team hand-picks the top 1% of single-family rental homes nationwide for you. Simply put, you can invest in institutional quality offerings for a fraction of the usual cost.
Each property undergoes a vetting process, requiring a minimum 12% return even in downside scenarios. Across the board, the platform features an average annual IRR of 18.8%. Their cash-on-cash yields, meanwhile, average between 10 to 12% annually. Offerings often sell out in under three hours, with investments typically ranging between $15,000 and $40,000 per property.
Every investment is secured by real assets, not dependent on the platform’s viability. Each property is held in a standalone Propco LLC, so investors own the property — not the platform. Blockchain-based fractionalization adds a layer of safety, ensuring a permanent, verifiable record of each stake.
Getting started is a quick and easy process. You can sign up for an account and then browse available properties. Once you verify your information with their team, you can invest like a mogul in just a few clicks.
Trending: Warren Buffett used 8 simple money rules to turn $9,800 into a stunning $150B — start using them today to get rich (and then stay rich)
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.
If you prefer a collaborative approach, Public offers a community-driven platform for investment insights.
Public’s social investing features let you share ideas with their community of investors, and gain insights from your peers. The platform democratizes investing by offering a commission-free platform for trading stocks, ETFs, cryptocurrencies, treasuries, and even alternative assets.
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.
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.