HOW TO INVEST IN REAL HOW I LEARNED TO STOP I HAVE EVERY DOLLAR I’VE WHY COMPOUND ARE YOU MISSING ESTATE WITHOUT OWNING STOCK PICKING AND LOVE EARNED IN MY 10 YEAR INTEREST ISN’T AS OPPORTUNITIES TO SAVE REAL ESTATE INDEX FUNDS CAREER POWERFUL AS YOU THINK $100,000+ IN ORDER TO (http://www.investmentzen(h.ctotpm://bwlwogw/.hinovwe-stmentzen(h.ctotpm://bwlwogw/.hinovwe-stmentzen(h.ctotpm://bwlwogw/.ii-nvestmentzenS.cAoVmE P/bENloNgIE/wS?hy- HOME (HTTP://WWW.INVESTMENTZEN.COM/BLOG/) » REAL ESTATE INVESTING (HTTP://WWW.INVESTMENTZEN.COM/BLOG/TOPICS/REAL-ESTATE/) JUNE 26, 2017 How To Use Warren Buffett’s “Moat” Strategy In Real Estate Warren Buffett buys investments with “economic moats” in order to earn safer, higher returns. You can use the same concept to buy protable real estate investments. Here’s how. j Sh3a1re s Tw3e2et b Pin1 a Reddit q Stumble B Pocketz Bu2ff2er h +1 2 k Email o 88 SHARES (https://www.(rhetdtpd:it//.wcowmw/.ssutubmbitl?euurpl=ohnt.tcpo:m//w/swuwb.minivt?eusrtml=hentttpz:e//nw.cwowm.i/nbvloegs/thmoewn-ttzoe-nu.sceo-mwa/brlroegn/-hbouwff-ettots-u-mseo-awta-srrtreant-ebguyf-fetts-moat- RELATED POSTS HOW TO INVEST IN REAL ESTATE WITHOUT OWNING REAL ESTATE (tiewornhoeswi-ta-tritnahlnep-tioavn:e/uelg-/-st)w--t-ww.(ihntvteps:/t/mwewnwtz.einnv.ceostmm/benlotgz/ehno.cwo-m/blog/how- to-invest-in-real-estate- CHAD CARSON without-owning-real- (HTTP://WWW.INVESTMENTZEN.COM/BLOG/AUTHOR/COACHCARSON/) estate/) Real estate investor, world traveler, husband & INVESTING IN REAL ESTATE VS STOCKS: PICKING A SIDE father of 2 (http://www.investmentzen.com/blog/real- (esminhtsovatttaecrpkst:et-/i-/tnvw-gsw-/)w.einstvaetset-mvse-nsttozcekn-.mcoamrk/belto- g/real- investing/) I’m a Warren Buffett nerd. While most people watch 45 WHAT TO DO WHEN YOU SHARES series on NetFlix for fun, I like to read through the INHERIT AN INVESTMENT PROPERTY archives of Berkshire’s Annual Letters (twipnhorhvt-odtepponsre:t-i-/rtmy/t-woayeun/wn)-tw- .(ihntvteps:/t/mwewnwtz.einnv.ceostmm/benlotgz/ewnh.caotm- /blog/what- (http://www.berkshirehathaway.com/letters/letters.html)! to-do-when-you-inherit- an-investment- Yeah, it’s that bad. property/) But if you’re reading this, I assume you’re a little HOW YOU CAN START REAL HOW TO INVEST IN REAL ESTATE INVESTING WITH ESTATE WITHOUT OWNING different, too. Maybe you’re proud to be an investment TRAINING WHEELS REAL ESTATE (eiwtnhrsihavtttieahnpest-i:etln/si-/ng/w)-gw- w.(ihntvteps:/t/mwewnwtz.einnv.ceostmm/benlotgz/erne.aclo-m/blog/real- (http://www.investmentzenn.ceormd /lbikloeg m/heo!w- estate-investing-with- to-invest-in-real- training-wheels/) estate-without- owning-real-estate/) After all, being a Buffett nerd has its advantages. For 5 NUMBERS THAT CAN MAKE OR one, I learned about the concept of an “economic moat.” BREAK YOUR REAL ESTATE It’s a principle that has made Buffett’s investment INVESTMENT (tmbyeinhosrvatetutaekatrpst-ek-c:etr/--ameo-/nware-lw-ntw/).(ihntvteps:/t/mwewnwtz.einnv.ceostmm/benlotgz/ennu.cmobme/rbsl-og/numbers- company Berkshire Hathaway billions of dollars in that-can-make-or-break- your-real-estate- prots. And it’s become a guiding principle with my own investment/) INVESTING IN REAL ESTATE investments. VS STOCKS: PICKING A SIDE (http://www.investmentzen.com/blog/real- estate-vs-stock- market-investing/) market-investing/) HOW I BUILT MY NEST EGG In this article, I’m going to explain what an economic FLIPPING HOUSES moat is and why it’s one of Buffett’s core investment (http://www.investmentzen.com/blog/how- (thhooitp-ustpptsiae:n/rs/gt/w-) ww.tion-vsetastrmt-einptpzienng.-com/blog/how- tenants. But unlike Buffett, I’m not going to share how houses/) to use the principle to buy stocks. Instead, I’ll show how AN INSIDE LOOK AT HOW I small investors like you and me can build protable MAKE MONEY AS AN AIRBNB economic moats using real estate investing. HOST (imah-hnmoot-stantpi/ker:)/eyb/-nwabsw- w.(ihntvteps:/t/mwewnwtz.einnv.ceostmm/benlotgz/ehno.cwo-m/blog/how- i-make-money-as-an- Let’s begin by discussing what an economic moat is. airbnb-host/) HOW TO BUILD A $1 MILLION REAL ESTATE PORTFOLIO ON ANOTHER CONTINENT (tiernhoes-tm-tritanepotav:et/ele-/-swlyt-w/)w.(ihntvteps:/t/mwewnwtz.einnv.ceostmm/benlotgz/ehno.cwo-m/blog/how- to-invest-in-real-estate- remotely/) HOW TO START INVESTING IN RENTAL PROPERTY (http://www.investmentzen.com/blog/how- (tipnhorv-t-orstepeptsane:t/rti/ntaw-ygl-/w-) w.tion-vsetastrmt-iennvtezsetnin.cgo-imn-/blog/how- rental-property/) RELATED QUESTIONS WHAT IS AN ECONOMIC MOAT? No posts found. An economic moat protects the prots of a business from attacks by competitors. It’s like a large moat of MOST POPULAR water around an ancient castle. A business with a wide economic moat has an enduring competitive advantage. This means its competitors have difculty duplicating it. (http://www.investmentzen.com/blog/best- way-to-invest-1000-dollars/) For example, one of Buffett’s investments is CocaCola. 22 EXPERIENCED INVESTORS SHARE THEIR BEST WAY TO Around the world, the formidable CocaCola brand INVEST $1000 (HTTP://WWW.INVESTMENTZEN.COM/BLOG/BEST- creates a competitive advantage. No other maker of WAY-TO-INVEST-1000- sugared water has been able to replicate their success DOLLARS/) with customers. Buffett has long used this principle to evaluate and (http://www.investmentzen.com/blog/how- purchase his best investments. The results? $1,000 much-should-i-have-in-my-401k/) HOW MUCH SHOULD I HAVE IN invested in Berkshire Hathaway at $19/share in 1964 MY 401(K) AT MY AGE? (HTTP://WWW.INVESTMENTZEN.COM/BLOG/HOW- would have been worth 11.6 million dollars in early MUCH-SHOULD-I-HAVE-IN-MY- 2015 (http://www.businessinsider.com/warren- 401K/) buffett-berkshire-hathaway-historical-returns-2015- 3)! (http://www.investmentzen.com/blog/average- But what does this have to do with you? Should you try net-worth-by-age-american- households/) to be like Buffett and identify individual businesses with OUR AVERAGE NET WORTH BY AGE: HOW DO YOU COMPARE? wide economic moats? Even Buffett himself advises (HTTP://WWW.INVESTMENTZEN.COM/BLOG/AVERAGE- most investors to just invest in a broad basket of NET-WORTH-BY-AGE- AMERICAN-HOUSEHOLDS/) index funds (http://www.investmentzen.com/blog/how-i- learned-to-stop-stock-picking-and-love-index- funds/) instead of picking individual stocks. (http://www.investmentzen.com/blog/how- to-start-investing-in-rental- property/) HOW TO START INVESTING IN I’ve found you have to apply this principle more broadly RENTAL PROPERTY than just stocks or bonds. Economic moats have worked (HTTP://WWW.INVESTMENTZEN.COM/BLOG/HOW- TO-START-INVESTING-IN- best for me in the world of real estate investing. RENTAL-PROPERTY/) EASIER ECONOMIC MOATS USING REAL ESTATE INVESTING (http://www.investmentzen.com/blog/should- With real estate investing, your can use your knowledge i-pay-o-my-mortgage-early-or- invest/) and skills to make more money investing. For example, SHOULD I PAY OFF MY MORTGAGE EARLY? HECK NO! you can study every property for sale or rent in a very (HTTP://WWW.INVESTMENTZEN.COM/BLOG/SHOULD- small area. As the local expert, you can then nd I-PAY-OFF-MY-MORTGAGE- EARLY-OR-INVEST/) properties priced below their full value. And unlike stocks sold on an exchange with millions of competing buyers, you often negotiate directly with the (http://www.investmentzen.com/blog/average- 401k-return/) seller or their agent. This gives you a chance to do even WHAT IS THE AVERAGE RATE OF RETURN ON A 401(K)? better on price. (HTTP://WWW.INVESTMENTZEN.COM/BLOG/AVERAGE- 401K-RETURN/) But not every piece of real estate will automatically have an economic moat. In the sections that follow, I’ll share ve competitive advantages you can look for with real (http://www.investmentzen.com/blog/how- estate investments: to-invest-a-million-dollars/) HOW TO INVEST A MILLION DOLLARS 1. Pricing power (HTTP://WWW.INVESTMENTZEN.COM/BLOG/HOW- TO-INVEST-A-MILLION- DOLLARS/) 2. Barriers to entry 3. Switching costs 4. Low-cost advantages (http://www.investmentzen.com/blog/how- to-manage-your-money-by- 5. Trade secrets automating-your-nances/) HOW TO MANAGE YOUR MONEY BY AUTOMATING YOUR Let’s begin with pricing power. FINANCES (HTTP://WWW.INVESTMENTZEN.COM/BLOG/HOW- TO-MANAGE-YOUR-MONEY-BY- COMPETITIVE ADVANTAGE #1 – AUTOMATING-YOUR-FINANCES/) PRICING POWER (http://www.investmentzen.com/blog/how- to-use-warren-buetts-moat- strategy-in-real-estate/) HOW TO USE WARREN BUFFETT’S “MOAT” STRATEGY IN REAL ESTATE (HTTP://WWW.INVESTMENTZEN.COM/BLOG/HOW- TO-USE-WARREN-BUFFETTS- MOAT-STRATEGY-IN-REAL- ESTATE/) (http://www.investmentzen.com/blog/how- Buffett’s favorite businesses are able to maintain and much-should-i-have-saved-for- retirement-at-my-age/) increase their prices over time. Their brand and products HOW MUCH SHOULD I HAVE SAVED FOR RETIREMENT AT MY are unique in the marketplace. This means they don’t AGE? have to cut prices to compete. (HTTP://WWW.INVESTMENTZEN.COM/BLOG/HOW- MUCH-SHOULD-I-HAVE-SAVED- FOR-RETIREMENT-AT-MY-AGE/) For example, Buffett has long owned Sees Candy, (http://www.sees.com/) a specialty chocolate and candy company. Instead of competing on price, Sees has raised prices consistently over the years faster than its production costs. This pricing power makes a company more protable over time. A well-located real estate property works in much the same way. An attractive property in a demand location is unique. Renters and buyers will pay progressively higher prices for the privilege of living there. I wrote an entire guide on how to choose the ideal investment property location (http://www.coachcarson.com/ideal-location- investment-properties/).