Market Update

Stock remains low - gain access to the huge number of off-market properties where opportunities do exist

5 Golden Tips from Warren Buffet to Property Investors

6Berkshire Hathaway Inc. became a brand synonymous with investing excellence and in becoming so; it brought the unique skills of Warren Buffet to light. This century’s most hailed investor is not only known for his witty narrations and quotes but for his brilliant analysis of the market and unbelievably precise investments as well. Pete Wargent for the Property Update talks about five strategies that Buffet has followed over the years. All these strategies can help you enrich your property investment portfolio.

Altering investment strategies and moving in sync with times

Investing in a company that trades way below its intrinsic value was part of the cigar-butt approach that Buffet learnt from his mentor. With times, in accordance with the market shifts (and the alarming pace of such shifts), Buffet revised his strategy and struck gold with companies that showed prospects of growth in future (quite opposite to the cigar-butt strategy). Yes, he still moved true to his principle of “high margin of safety”. Property market has also undergone major shifts; inflation and interest rates are well within control and there is a marked propensity towards medium-density dwellings today. This means that the property investors should also adopt their stance in tune with the times. For instance, how would an investment in a suburban McMansion help you today?

Property Investments should be quality-centric

High quality properties which never run out of demand should be your point of attention. It may not be wise betting on those unproductive properties, searching for that once-in-a blue-moon windfall. This is something that Buffet has always followed, Gillette and IBM being a couple of classic examples.

Fear property dilution

Executives in a company may exercise their multiple stock options thus bringing down the value of existing share and also compromising the earning of a stock (calculated on each share). This is called Dilution. Buffet abhors such a strategy and his disdain for dilution can be studied for the property market too. If you invest in areas offering huge supply of development-ready lands, you will lose out on the scarcity value of a plot. In time, this will bring down the worth of your property a great deal.

Your investment portfolio should be hinged to sustainable growth

If your creditworthiness is high, you can borrow almost any amount in today’s low-interest market but the mortgage stress would eat you out in times. Thus you should only pull up sustainable debts. In terms of sustainable landscapes, an investor must seek those areas which have been supported by long-term trends. For instance, the population boom in the four capital cities hint towards a period of long-term growth (Macroeconomics certainly supports the idea)

Look for worthy assets that are running low

Do not invest in unproductive areas but look for high-quality assets which are at the receiving end of the property cycle trough. They will pull you through in the long-term and do so in a big way.

You can read the full article here.

It would be foolish to doubt any of Buffet’s ideas. It’s worth noting that for the first time, this investor of colossal repute has shown signs of tiredness. He has warned his stockholders of a relatively lean patch ahead. Having said this, we might still strike gold following his ideas.

Do you have a favourite investment tip?