Here's Why Warren Buffett is Wrong About Real Estate

We often see titles online that are misleading. Today we take a little time to push back on a video we found on Youtube titled, "Warren Buffet: Why Real Estate Is A Lousy Investment". Taking into account investment strategy, the size of your organization, your entity structure, and your expertise, we show how these blanket statements might not be applicable for you as an investor.   --- Transcript   Hey everybody, welcome back to The Remote Real Estate Investor. My name is Emil Shour. Today, I've got my co host with me,   Tom: Tom Schneider,   Michael: Michael Albaum.   Emil: And we're gonna be talking about and breaking apart a video that we've seen floating around on YouTube, titled Why real estate is a lousy investment. And this was from a speech from Warren Buffett and Charlie Munger during one of their annual conferences. So we're going to break it down and tell you what the video says and give you our thoughts as to why we believe this title is absolutely wrong, and why real estate is actually a great investment. So let's hop into this one.   Alright, guys, so we all just watch this video. And the title is very click Beatty, right? Why real estate is a lousy investment. And I'm sure that was created for a very specific reason to get a lot of YouTube clicks. But when we when we all watched the video, there were some very clear takeaways. First, first one, which is like the first minute or two, Warren Buffett actually talks about how Charlie Munger, his business partner actually made most of his early money in real estate. And that, why they believe real estate is a lousy investment is actually why it's a lousy investment for Berkshire. And so he lists lists a couple different reasons. You guys want to talk about those reasons real quick.   Tom: I’ll start with it's a double clickbait article. It's not just why real estate is a lousy investment, it's Warren Buffett; Why real estate is a lousy investment. And I think I'll let Michael speak a little bit more to one of the arguments, which is the tax implications. Mike, I'll let you lead through,   Michael: Oh of course you give me the tax.   Tom: You know, there you go.   Michael: Smooth!   Tom: Smooth transition, but all, you know, all speak to one of their arguments is one of them is they didn't feel that they had a competitive advantage in and they were mainly speaking to commercial buildings, like talking about like Chicago class, a office, their argument is that is priced pretty effectively. So they didn't feel they had much of an advantage in in any type of price discovery. And I think, you know, there's such a, like an industry, institutional capital in that like larger, you know, Class A commercial space, it makes sense that, you know, as, as them and as an investor, you know, they're they're looking for value in other spaces. It's not necessarily that it's a lousy investment, it's just like, that's not where they're kind of bread and butter is, even though it was in the very beginning of their career. So, Michael, let you I'll let you transition you over to the more technical response on…   Michael: Yeah, tax, vitiated. Yeah, I think just kind of, to paraphrase what you're saying, Tom, for our listeners is they just can't seem to find deals or they don't think that there are deals out there to be had where the there's a disconnect between what the investor can buy it for versus what it's worth. And so in that market, that they talked about that class a commercial stuff, they're just not seeing deals to be swept up. So I think that's, that's kind of the point they're making.   So regarding the tax structure, I'm gonna do my best here. Full disclosure, not a tax professional, not a tax expert, but there are different types of entity structures in which you can have as a business, you can have a sole proprietor, you can have an LLC, an LLC, you can have a C Corp, you can have an S Corp. Just real quick side note, have you guys ever seen Arrested Development