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Warren Buffett is renowned for his shrewd investments, particularly his knack for buying companies with durable competitive advantages. However, his investment wisdom extends beyond companies and stocks.
In fact, there are two non-stock investments that the now-retired CEO of Berkshire Hathaway has made and considers particularly “instructive.”
“The two investments will be solid and satisfactory holdings for my lifetime and, subsequently, for my children and grandchildren,” he wrote in a letter to Berkshire shareholders (1).
He also projected that the income from the two investments “will probably increase in the decades to come.”
Here’s a closer look at those two investments — and how you can get in on the action today.
Buffett’s first investment in this asset class began in the ’80s, when farm prices in the Midwest dropped sharply due to a market bubble. As prices fell, the Oracle saw a chance to invest.
“In 1986, I purchased a 400-acre farm, located 50 miles north of Omaha, from the FDIC. It cost me $280,000, considerably less than what a failed bank had lent against the farm a few years earlier,” Buffett recounted in his letter.
Buffett then calculated that the normalized return from the farm would be 10%. He also believed that productivity would likely improve over time and that crop prices would increase. He highlighted that “both expectations proved out,” noting that by 2014, the farm had tripled its earnings and was worth five times more than what he paid.
Farmland has historically demonstrated its capacity to appreciate in value over time, particularly during periods of inflation. This characteristic makes farmland an attractive asset for many investors, not just Buffett. Among them are fellow billionaires like Bill Gates.
In fact, Gates owns 242,000 acres of U.S. farmland, making him the nation’s largest private farmland owner, according to The Land Report (2). His acreage is spread out over 17 states, with substantial holdings in Louisiana, Arkansas and Nebraska.
If such an outdoorsy investment seems like a mismatch for the cofounder of Microsoft, keep the dollar signs in mind. Gates’ investment firm views farmland as “a stable, long-term asset that diversifies his tech-heavy portfolio.”
However, farmland ownership comes with significant hurdles. The upfront capital for acquiring even small tracts of land poses a formidable barrier to entry for everyday investors. Further, investors must understand farming or rely on experienced farm management.
The USDA and other organizations do provide programs for individuals to purchase farmland, but in the main, this asset class is one that’s reserved for accredited investors.
Enter FarmTogether, a company offering a range of funds and bespoke investment opportunities for investors looking to put some capital to work in physical farmland. Their rigorous process, backed by advanced technology and industry experts, ensures only the top 1% of farmland deals make it to investors.
With more than $2.1 billion in capital deployed alongside a conservative and disciplined investment philosophy, FarmTogether makes it possible for accredited investors to take advantage of the gains of this investment class, just like Buffett and Gates.
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The second investment also arose from the burst of a bubble — this time in commercial real estate.
In 1993, Buffett learned that a New York retail property adjacent to New York University was up for sale by the Resolution Trust Corporation (RTC).
Buffett determined that the unleveraged current yield from the property was approximately 10%. He noted that the RTC had undermanaged the property, and leasing the vacant stores would enhance its income.
More importantly, Buffett identified a major opportunity: The largest tenant, occupying about 20% of the space, was paying rent of only $5 per square foot, while other tenants averaged $70. He wrote, “The expiration of this bargain lease in nine years was certain to provide a major boost to earnings.”
Armed with this analysis, Buffett joined a small group of investors to purchase the property. The decision proved to be successful.
“Annual distributions now exceed 35% of our original equity investment,” Buffett wrote in his letter to shareholders.
While Buffett’s calculated investment in a New York retail property yielded extraordinary returns, similar opportunities have historically been less accessible to the average investor — until now.
Although accessing commercial real estate is Buffett’s recommendation, doing so is easier said than done. For a more accessible entry point into real estate with lower minimums, you could instead invest in residential rental properties through mogul.
This real estate investment platform offers 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 late-night tenant calls.
Founded by former Goldman Sachs real estate investors, the mogul team handpicks 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.
But residential real estate is only one slice of this alternative asset vertical. Other options — aside from commercial — include multifamily units and even industrial real estate.
If diversifying into multifamily and industrial rentals appeals to you, you could consider investing with Lightstone DIRECT, a new investing platform from the Lightstone Group, one of the largest private real estate companies in the country with over 25,000 multifamily units in its portfolio.
Since they eliminate intermediaries — brokers and crowdfunding middlemen — accredited investors with a minimum investment of $100,000 can gain direct access to institutional-quality multifamily opportunities. This streamlined model can help reduce fees while enhancing transparency and control.
And with Lightstone DIRECT, you invest in single-asset multifamily deals alongside Lightstone — a true partner — as Lightstone puts at least 20% of its own capital into every offering. All of Lightstone’s investment opportunities undergo a rigorous, multistage review before being approved by Lightstone’s Principals, including Founder David Lichtenstein.
How it works is simple: Just sign up with your email, and you can schedule a call with a capital formation expert to assess your investment opportunities. From here, all you have to do is verify your details to begin investing.
Founded in 1986, Lightstone has a proven track record of delivering strong risk-adjusted returns across market cycles with a 27.6% historical net IRR and 2.54x historical net equity multiple on realized investments since 2004. All told, Lightstone has $12 billion in assets under management — including in industrial and commercial real estate.
As such, even if multifamily rentals don’t appeal to you, Lightstone could still serve you well as an investment vehicle for other real estate verticals.
Get started today with Lightstone DIRECT and invest alongside experienced professionals with skin in the game.
Ultimately, it’s worth asking what there is to learn from Buffett’s investments in these two assets.
Perhaps the most important lesson might be the timing of his purchases: Note that while Buffett is optimistic about the future of these two investments, he made them after their respective bubbles had already burst. He waited until the price was right.
He also did his homework. Before making the investments, he conducted thorough analyses to forecast his returns, so he had a pretty good idea of what he was getting into.
In fact, in his letter to shareholders, Buffett emphasized that if you don’t feel comfortable making a rough estimate of an asset’s future earnings, you should “just forget it and move on.”
This good advice could be applied to any investment.
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Berkshire Hathaway (1); The Land Report (2)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
