What I Stole from Warren Buffett

What did I steal from Warren Buffett? What did I break into his company headquarters in Omaha, Nebraska for and snatch like a thief in the middle of the night???

As you may know, Buffett is currently the second richest man in the world, with an estimated net worth of $40 billion. Buffett is unique because he gained his wealth exclusively through investing, instead of starting or owning a single company or having an invention. Don’t be too quick to brush off the Oracle of Omaha simply because he’s considered a ’stock market guy’ and not a real estate specialist.

adam-davis-private-money-warren-buffettFirst of all, many of his investments are quite real estate dependent (he owns one of the largest real estate brokerages in America, along with building supply businesses). Second of all, any time someone amasses a fortune through investing, there ’s definitely some things we can learn and apply in our own businesses.

I’ve been a Warren Buffett student for many years (as many years as I’ve been investing in real estate). From reading his annual shareholder letters to books such as The Snowball: Warren Buffett and the Business of Life, by Alice Shroeder, I have gained tremendously in my real estate investing and private money raising.

Here are just a few things that I “stole” from Warren Buffett to apply in my own business…

Getting private money

This is a shocker, huh? Indeed, Warren Buffett started his professional investing career with several small partnerships in the late 1950’s. He raised money from private investors (partners) to fund these partnerships. Keep in mind: at the time he wasn’t the Warren Buffett we know of today, he was young and relatively unknown.

Buffett started off with $100,000 (roughly equivalent to $761,000 in 2009 dollars) in private money from limited partners. His initial investors were some friends, family and other associates (doctors, lawyers, etc.) that liked his approach to investing and thought that he could make them money (boy, were they were right!)

Working with investors

Buffett has been masterful in working with private and public investors alike over his 40 + year investing career. While Buffett first started out with private investment partnerships, he eventually took his company public by acquiring Berkshire Hathaway (which became the flagship for most future investments).

Over the years, Buffett has gained a great deal of notoriety with his informative and sometimes even humorous approach to investor relations. His annual shareholder letters contain great pearls of business wisdom and also show his investors the type of person he is and gives them more reasons to keep their money invested and, perhaps invest more money.

Pay cash

Warren Buffett open eschews leveraging too much. He doesn’t want his businesses future to be ‘based on the philanthropy of someone else’. What he means by this is that when you borrow too much money and someone calls that debt in, your business can be stuck in a bad spot. Sound familiar? Yes, this is exactly what happened to many businesses (real estate investing related and not) during the credit crunch of 2006-present.

If you raise the capital and pay cash for your real estate investments with private money and bring with it the inherent power and flexibility, you won’t have to rely on any Wall. St. banks or other quirky institutions that may crimp your profits.

Buying at the right price cures all

When you buy bargain real estate, usually distressed properties, you have the best chance to acquire assets at what Buffett calls a “margin of safety.” The margin of safety simply means that the market could suffer adversity or things could not go perfectly according to plan and you still make money. What a concept right? Things don’t go perfectly, but I still make money. My downside is protected, as well as my private money lenders or equity investors.

But how do you know if you’re buying at the right price? Simple. Do what Buffett does: take your estimated value of an investment property and slice 25% to 33% off of it. Make that number the maximum price you’ll pay for the deal. Think it can’t happen? Think again: banks and asset managers (not to mention HUD) are very eager to unload properties right now. If you pay cash (hint) you can get the cash buyers discount that builds in an automatic margin of safety for you.

This single approach that I stole from Warren Buffett has results in millions in private money as well as multi-million deals in my company coffers. Private money investors like this approach because it shows them that they have a very small chance of losing money and a very big chance of making handsome returns by placing their funds with you.

I do realize that there are a lot of real estate “guru’s” who will disagree with myself and Mr. Buffett. They might say that you can make money by pursuing marginal deals or by ignoring the needs of your investors. I disagree with these approaches. The purpose of this blog is to show you how to get private money to do more deals in less time and build substantial wealth and cash flow. It’s difficult to achieve wealth when you ignore the principles of the second richest man on the planet – a guy who’s made his fortune by investing.

My advice: steal a few principles from Warren Buffett yourself and watch your net worth double or triple in the next 12 months.