In 2017, business mogul Warren Buffett did something a little unusual for him. He poured hundreds of millions of dollars into real estate investments.
Buffett has long denied investing in real estate. He calls it a “poor investment.” This is because the property can be expensive to maintain. Properties also often require the necessary “sweat equity” or physical effort to keep them from upgrading or simply falling into disrepair.
Still in 2017, Berkshire Hathaway (New York Stock Exchange: BRK-A) invested $377 million in real estate companies and acquired an additional 5.8 million shares in 2020.
The target company is STORE Capital (New York Stock Exchange: store), real estate investment trusts (REIT) manages more than 3,000 facilities across the United States, including restaurant sites, manufacturing facilities, kindergartens, auto repair shops, and gyms.
STORE has been doing well since it started paying out in 2014, with dividends up 259% since then. The current yield is 5.17%, almost three times the S&P 500 average yield of 1.82%.
STORE achieved this staggering streak thanks to special designations under US tax law. As a REIT, you are exempt from corporate tax on your real estate holdings as long as you return at least 90% of your profits to investors in the form of dividends each year.
REITs were hit hard during the pandemic, but have since turned around. Billionaire investor Bruce Flatt, known as Canadian Buffett, successfully managed over $500 billion in November 2020 Brookfield Asset Management Co., Ltd. (New York Stock Exchange: bam) told Bloomberg that it believes REIT is the best bargain on the market today.
Over the next two years, more billionaires began to take an interest in REITs. $41.2 billion private Steve Schwarzman, CEO of his equity firm Blackstone Group, has launched a real estate flagship fund with a goal of raising $30.3 billion. Pershing Capital’s Bill Ackman, who nimbly traded the pandemic-induced market crash and subsequent rebound, profiting $3.8 billion, now recommends hedging inflation with REITs. And Paul, his Tudor, his Jones, who predicted the 1987 stock market crash and earned his $100 million from it, scooped up hundreds of thousands of shares in his REIT last quarter.
The lazy way to become a landlord
Real estate investment trusts offer a way to make money on real estate without worrying about upkeep. No calls from tenants about broken air conditioners, no property taxes, no headaches with private land ownership.
But REITs are not a silver bullet. The Vanguard Real Estate ETF, a fund that tracks REITs, has returned 48% since January 2012. Meanwhile, the S&P 500 has recorded a 214% return for him.
Some investors may prefer large dividend payments over capital appreciation.but at least one billionaire, Jeff Bezosare avoiding the REIT boom For a more aggressive way of playing real estate.
For income investors opting out of the chores of property ownership and abandoning dividend yields to target capital appreciation, crowdfunding could be the answer. real estate offer screener Helping readers discover and grasp passive real estate opportunities here.
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