Even Buffett Digs Single Family Homes

This is a clip from 2012, so I consider it quite promising for the housing market, if the Oracle of Omaha digs single family homes as an investment.  He would like to buy a “couple hundred thousand” of them, as a way of shorting the dollar.  Never looked at it that way, but he is right.  The value of a dollar is going down, yet the historical value of real estate goes up.  In a sense, buying real estate is a means of shorting the dollar.  Buffett has never been an active real estate investor, but he knows value, and he sees value in the housing market right now.  With cheap money opportunities and low housing values, it seems the perfect storm has emerged for those with good credit.  So, for those of us who are risk takers and have a long term investment outlook, I think real estate is a slow and steady wealth builder.  That is exactly Warren Buffets philosophy, he has never been a get rich quick enthusiast, and wealth building from real estate is consistent with his overall value investing philosophy.

Its interesting that Buffett says he would love to buy a couple hundred thousand, cause that is exactly what hedge funds are doing right now.  Hedge funds are manipulating the value of single family homes and apartments, almost exclusively!   They have buyers go to auctions and pick up apartments and single family homes by the hundreds, even thousands.  This is driving the cost of housing up, and eventually we will see ourselves in the same predicament we were in, circa 2007.  How is this effecting housing prices you ask?  Increased demand and a limited supply.  So a hedge fund goes into a city and over-pays for 100 houses in that particular city, this affects the comps in the surrounding neighborhood.  I say the hedge funds over-pay because the buyers are not the ones putting up the capital and assuming the risk.   They are simply told to go out and buy X amount of houses in a particular neighborhood each day, week, and month.  This has created a new asset class called REO to Rental.  REO’s are bank owned properties and these are being bought up in bunches by hedge funds.  Seems like a good idea right, but remember the term mortgage backed securities?  These groups of mortgages, packaged as securities and sold on the open market, caused major problems to the entire housing market back in 2008.  So, here we go again!  According to a recent JPMorgan Chase report, Wall Street has already raised or committed as much as $10 billion for REO-to-rental, enough to purchase 15 percent of all bank-owned homes.

for-sale-for-rentSo, back to Buffett and his desire to own a couple hundred thousand single family homes.  He mentions the difficulty in managing all those properties as the reason for him passing on this investment strategy.  This will ultimately be the same problem the hedge funds encounter, and the reason they will eventually get out of the market.  Hedge Funds will find that the cost of management, repairs, liability, will be far more than they bargained for.   Being an investor thousands of miles away, with no history of being landlords and a exceptionally rigid bottom line to meet, is a recipe for failure.  It is my humble opinion that the most successful landlord of a single-family property for rent, is a local mom-and-pop business with a stake in the community, and not a profiteering, unsympathetic New York based hedge fund.

Your thoughts?


Join our newsletter

If you like Critical Financial, subscribe and get our latest content via email.

Powered by ConvertKit

Share this post:

Related Posts


  1. Mr. 1500 says:

    I love Buffett and remember that quote! As usual, he was right, Look at how values have appreciated lately.

    On a related note, the Berkshire shareholder meeting is a “must do” at least once in life.

    • Jim says:

      Your right about the shareholder meeting, Mr 1500, I have been once (my brother is a shareholder and a die-hard Buffett fan) and it was a site to see. I Will eventually go back! Buffett is such a character and often mis-interprepreted because he is so wealthy, people automatically assume he lives a life of excess and that is simply not the case! You going to FINCON in St. Louis this year?

  2. I always tend to trust Buffett, because let’s face it, he’s got a pretty solid track record. If we had the cash right now, we’d most definitely invest in real estate!

Leave a Comment


May the 4th Be with You: Star Wars Swag on Amazon

May the 4th Be With You: Star Wars Day Swag

It began as the punniest holiday ever but quickly grew into an earnest (if somewhat random) celebration of the long-running (and still... more →
People count the money to buy a house in future success.

Avoiding Mortgage Scams: Don’t Fall for Unreasonable Promises

If it sounds too good to be true, it probably is. That’s sound advice for almost all aspects of life, including the search for... more →
Eat for free for a whole month via the meal kit companies discounts for new customers.

How To Get a Month of Free Food: 9 Meal Kit Companies Offering Discounts to New Customers

Play your cards right and you might be able to line up a month’s worth of free meals if you were to try out all nine of the meal... more →
Generate extra cashflow -- here are 97 ways.

96 Awesome Ways to Generate Extra Cashflow

Who doesn’t want more money nowadays? We’ve got you covered on that front. Here comes a long list of different ideas on... more →
Valentine's Day gifts that won't destroy your budget

Valentine’s Day Crafts Are Romantic Rescue from Crazy Inflation

Fall for the hype this week and you’re out an average of $143.56 for Valentine’s Day. Crafts and other do-it-yourself tactics... more →

Ultimate Guide to Bitcoin — FREE Ebook!

Have we got something for you: a free ebook about bitcoin! more →
Get a flu vaccine.

Why You Need To Get a Flu Vaccine Right Now

Flu vaccines aren’t just for the elderly  anymore. Here are 25 reasons you should go get vaccinated. more →
Financially successful

Acquire the Trait All Financially Successful People Have

Financially successful people tend to all have a lot of self-discipline. Improving your discipline in one area of your life often spills... more →

What’s the Best Free Recipe App?

The Apple Store and Google Play together offer more digital cookbooks than you probably have room for on your mobile device. So which... more →
New tax law might slow down housing market.

What Will the New Tax Law Do to the Housing Market?

The new tax law will have a profound impact on the housing market, although in ways that go beyond the deductibility of mortgage interest... more →

4 in 5 Households Will Get a Tax Cut in 2018

Four out of five U.S. households will get a tax cut as a result of the legislation that President Donald Trump signed into law today. more →
Will bitcoin reach $100,000?

When Will Bitcoin Reach $100,000?

Bitcoin has accelerated its pace of appreciation in recent months, and if the current levels between $15,000 and $19,000 make you itch... more →
The Dow Jones topped 24,000 -- now what?

The Dow Jones Crossed the 24,000 Threshold. Now What?

Stocks appear to be increasing in volatility, yet the markets closed on Monday, December 4 with the Dow Jones Industrial Average is... more →
Peer mortgage

Should You Get a Peer-to-Peer Mortgage?

If you can’t get approved for a home loan from a bank, you might want to look into applying for a peer-to-peer mortgage. more →
Investment gifting is awesome.

4 Things To Know Before You Donate an Investment

While donations of any kind are appreciated, gifting investments benefits both the giver and the receiver. Here are four key things... more →
Are you wondering: What's the Relationship Between the Stock Market and Federal Debt?

What’s the Relationship Between the Stock Market and Federal Debt?

Wouldn’t it be wonderful if gains in the stock market could actually reduce U.S. government indebtedness? If that were true,... more →
mortgage, re-mortgaging, home mortgage

Should You Consider Re-Mortgaging Your Home?

With mortgage rates dropping and house prices rising, many people are looking to take advantage by re-mortgaging their homes. There... more →