Warren Buffett

Warren Buffett is considered one of the best investors of all time. He is referred to as the “Wizard” or “Oracle.” The Wizard has seven “Investing Rules” for stocks. We apply the same rules to our real estate investing.

Rules 1-7

• Rule No. 1 – Never lose money.” This is the most important rule. If there is a significant chance of losing money, we do not invest. Our focus is protecting the asset by finding a great value property and creating positive cash flow. We do not count on appreciation as the primary source of profit.
• Rule No. 2 – Never forget Rule No. 1. We can’t ever say enough about the importance of “Rule No. 1.”
• Rule No. 3 – If principles become dated, they are not principles.” Value investing principle withstood the test of time through Benjamin Graham, the mentor for Warren Buffett, during the great depression to the Warren Buffett era, which endured the Dow crash, the Savings & Loan crisis, the Long-Term Capital Management crisis, dot-com burst of the bubble, and subprime mortgage crisis.
• Rule No. 4 – Price is what you pay.” We decide how much to pay for the property, not the seller or brokers. Our system and the algorithm calculate a fair offer price according to the data inputs we gathered.
• Rule No. 5 – Value is what you get.” We decide the purchase price based on value. The value is the most important because that is the safety net. We know our valuation will limit the downside risk while having much bigger rewards when the market condition is right. Also, the value is often what other people want to pay for our property.
• Rule No. 6 – Buy businesses, not stocks.” When reviewing stocks, you should focus on how the company runs its business, its officers, the process, the system, etc. This is true with real estate investing. You should consider our acquisition methods, repositioning tactics, management system, and exit strategies more than each of our properties for long-term benefit.
• Rule No. 7 – investing is not a game where the guy with an IQ of 160 beats the guy with an IQ of 130. Rationality is essential.” We may not know if we are the smartest people in the industry. It does not matter. We carefully analyze each property objectively according to common sense and logic. We carefully plan our acquisition and exit strategy before we sign any purchase agreement. Before making the deal, we know the possible downside, potential upsides, and cash flow amounts.