Warren Buffett Real Estate | 3 Reasons Why Warren Buffett Invests in Real Estate Through REITs

Warren Buffett does not allocate capital to direct real estate ownership. Berkshire Hathaway has held a few REITs. Learn more about the best REITs to invest in below.

last updated Wednesday, July 9, 2025
#warren buffett real estate #Investing in real estate

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by John Burson

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Warren Buffett's Real Estate Investment Philosophy

Warren Buffett's approach to real estate investing is fundamentally different from conventional wisdom. The Oracle of Omaha consistently emphasizes that stocks offer superior liquidity, scalability, and ease of management compared to direct real estate ownership. When Berkshire Hathaway ventures into real estate, it primarily does so through Real Estate Investment Trusts (REITs), which provide exposure to real estate markets without the operational complexities of property management.

Key Takeaways:

• Buffett views direct real estate as an active business, not a passive investment.
• REITs offer the real estate exposure he seeks with stock-like liquidity.
• His investments focus on quality management, strong fundamentals, and reliable income streams.
• He can deploy billions in stocks more efficiently than in individual properties.

Understanding Buffett's Real Estate Philosophy

The Fundamental Distinction: Investment vs. Business

Warren Buffett is one of a handful of investors who have produced an average 20% annual return on assets under management for over 50 years, vastly exceeding the standard of five to six years. So, when he makes an investment move, everyone pays attention. However, Warren Buffett's real estate investment approach differs from that of mainstream investors.

Warren Buffett has repeatedly emphasized a crucial distinction that many investors overlook: direct real estate ownership is a business, not a passive investment. During recent Berkshire Hathaway annual meetings, Buffett has explained that while he recognizes real estate's inherent value, he generally avoids direct ownership because it requires significant operational involvement.

"Real estate can be a good investment under certain circumstances," Buffett has stated, "but it's important to understand that when you buy a property, you're not making a passive investment—you're starting a business."

This perspective shapes his entire approach to real estate investing. Unlike traditional real estate investors who may purchase rental properties for passive income, Buffett views property ownership as requiring active management, maintenance, tenant relations, and ongoing decision-making.

Although the CEO of Berkshire Hathaway (NYSE: BRK.A)¹ (NYSE: BRK.B)² rarely invested in real estate in the past, he has recently made substantial investments in real estate investment trusts (REITs) as part of his passive income strategy for real estate. Out of more than 200 publicly traded REITs in the U.S., only two companies have managed to attract Buffett:

• Store Capital (NYSE: STOR)³
• and Seritage (NYSE: SRG)⁴.

By examining Store Capital and Seritage’s profiles, we can better understand why Warren Buffett chooses REITs over physical properties for significant investments. So, we’ll take a closer look at these companies as we discuss the three reasons Warren Buffett and Berkshire Hathaway invest in REITs.

Why Buffett Prefers Stocks Over Real Estate

Buffett's preference for stocks over direct real estate stems from several practical considerations:

Liquidity Advantages:

Stocks can be bought and sold instantly during market hours, while real estate transactions can take months to complete. For Berkshire Hathaway, which manages over $300 billion in assets, this liquidity difference is crucial for capital allocation flexibility.

Scalability: 

"We can move billions of dollars into stocks much more easily than into real estate," Buffett has noted. Individual property purchases, even large ones, cannot absorb the massive capital flows that Berkshire generates.

Management Efficiency:

Stocks require no direct operational involvement from Berkshire's team, while real estate would demand significant management resources that could be better deployed elsewhere.

Market Efficiency:

Public stock markets provide continuous pricing information and high liquidity, making it easier to assess values and make rapid adjustments to positions.

Buffett: Real Estate Ownership is a Business, Not a Passive Investment.

Since it is a business, owning real property can be a mistake for investors looking for a passive income investment. Ownership involves maintenance, rent collection, and problem-solving unless you hire a property manager.
On the other hand, a REIT investment is a much better source of passive income than property investments. For example, Buffett holds a 9.8% stake in Store Capital for substantial passive income. This investment makes sense because Store Capital ranks in the top five in its class with a 5.22% yearly dividend yield and a dividend payout ratio of 1.56.

Warren Buffett’s REIT-dominated passive income strategy might help you make wiser investment decisions when investing in real estate, considering the reasons for his Store Capital investment choice.

Rewards vs. Management

In real estate investing, rewards and management are often seen as opposites. For example, Warren Buffett's REIT investments favor rewards over management.

Rewards in real estate come in two forms:

• growth potential
• and dividends.

Warren Buffett’s investment in Store Capital is fulfilling its promise by focusing on dividend growth. However, he purchased an 8.03% stake in Seritage with a different motive. This company has a mediocre dividend yield, but Buffett invested in Seritage due to its growth potential resulting from planned rent increases on lease-holding stores. Also, the company has signed 535,000 square feet of new leases, and the expansion project has aligned with Buffett’s growth perspective. 

By investing in real estate through REITs, Buffett benefits from the growth potential or dividend yield rewards without owning, managing, or financing properties. REITs also provide tax advantages, diversification, and leverage.

Liquidity as a disadvantage

The most ignored yet significant aspect of investing is liquidity. When you invest in real property, your capital could be tied up for a long time, making a traditional real estate investment illiquid. This disadvantage can be problematic in uncertain times.

On the other hand, when you invest in real estate through REITs, you can sell your units at any time, as they are publicly traded financial instruments. You have to pay your broker a percentage of the exit load. No other effort is necessary besides putting an offer of sale from your account.

Warren Buffett Related Real Estate Companies

BERKSHIRE HATHAWAY INC

Berkshire Hathaway real estate: Berkshire Hathaway Home Services is a real estate franchise network tailored to meet the demands of the modern real estate market. The company caters to many clients, from first-time home buyers to those searching for their dream home. When you choose Berkshire Hathaway, you can always count on their down-to-earth team members and local experts to provide you with the best service, skills, and support.

1. BERKSHIRE HATHAWAY INC  CHART. BRK.A

2. BERKSHIRE HATHAWAY INC. CHART BRK.B

Seritage Growth Properties, CHART SRG

About Serigate

Website: seritage.com 

CEO: Andrea Olshan (Mar 2021–) 

Subsidiaries:

• Seritage Src Finance LLC,
• GS Portfolio Holdings II, LLC
• MS Portfolio LLC
• GS Portfolio Holdings (2017) LLC 
• SF WH Joint Venture LLC
• SI UTC LLC
• GS Portfolio Holdings II LLC 

Founded: 2014 Headquarters: United States Number of employees: 32 (2022)

Best REITs to Invest In: Insights from Warren Buffett

Many investors look to Warren Buffett for guidance when considering the best REITs to invest in. While Buffett is primarily known for his stock market expertise, his investment principles can be effectively applied to REIT investing.

Understanding REITs Through Buffett’s Lens

Warren Buffett emphasizes investing in businesses with strong fundamentals and reliable income streams. This philosophy aligns perfectly with the concept of REIT stocks, which focus on real estate properties generating consistent rental income. By selecting the best REITs to invest in, investors can benefit from stable dividends and potential property value appreciation.

Key Sectors Buffett Might Favor in REIT Investing

Buffett would likely favor REITs in high-demand sectors such as:

• Commercial Real Estate: Properties like office buildings and retail spaces that maintain steady occupancy rates.
• Healthcare Facilities: Medical offices and senior living communities that cater to an aging population.
• Industrial Spaces: Warehouses and logistics centers that support the booming e-commerce industry.

These sectors not only provide consistent rental income but also offer resilience against economic downturns, making them attractive choices for REIT investing.

Are REITs a Good Investment? Warren Buffett’s Perspective

Are REITs a good investment? According to Buffett’s investment strategies, they can be. By focusing on REIT stocks with strong management teams, solid asset bases, and growth potential, investors can build a diversified and robust portfolio. Buffett’s approach encourages looking for value and long-term growth, both achievable through strategic REIT investing.

Top REITs to Consider

While Buffett hasn’t publicly endorsed specific REITs, applying his investment criteria can help identify top performers. Look for REITs with:

• Consistent Dividend Payouts
  Reliable income streams are a hallmark of strong REITs.
• Quality Assets
  Properties in prime locations or growing sectors ensure long-term value.
• Experienced Management
  A capable management team can navigate market fluctuations and drive growth.

Learn how real estate investments can help high-net-worth foreign nationals secure a U.S. green card and permanent residency through the EB-5 Visa Program.

Common Misconceptions About Buffett and Real Estate

Myth: Buffett Doesn't Invest in Real Estate

Many investors believe Buffett avoids real estate entirely, but this isn't accurate. Berkshire Hathaway has significant real estate exposure through:

1. REIT investments providing passive real estate exposure
2. Berkshire Hathaway HomeServices, a major real estate brokerage network
3. Clayton Homes, a manufactured housing company
4. Various subsidiaries with substantial real estate holdings

Myth: Buffett Considers Real Estate a Bad Investment

Buffett doesn't view real estate as inherently bad—he recognizes that direct ownership doesn't fit Berkshire's investment model. He has acknowledged that real estate can be an excellent investment for individuals or companies with the right expertise and resources.

Myth: REITs Are Buffett's Primary Real Estate Strategy

While REITs provide Buffett's primary liquid real estate exposure, they account for a relatively small portion of Berkshire's overall portfolio. His real estate investments are opportunistic rather than strategic allocations.

The 3 Strategic Reasons Buffett Chooses REITs Over Direct Real Estate

1. Superior Capital Efficiency for Large-Scale Investors

The Challenge: Direct real estate ownership requires significant capital deployment per asset, limiting diversification and flexibility for institutional investors.

Buffett's Solution: REITs enable rapid deployment of substantial capital across diversified, professionally-managed portfolios.

Investment Opportunity:

• Minimum Investment Threshold: $500K+ for optimal diversification
• Target Allocation: 5-15% of total portfolio for sophisticated investors
• Expected Returns: 8-12% annually through dividend income and capital appreciation

Premium REIT Categories Buffett Favors:

• Industrial REITs: $2B+ market cap, serving Fortune 500 tenants
• Healthcare REITs: Demographic-driven growth with 15+ year leases
• Data Center REITs: Technology infrastructure with investment-grade tenants

2. Institutional-Grade Management Without Operational Burden

The Institutional Advantage: REITs provide access to the same caliber of real estate professionals that manage billions in institutional assets.

Buffett's Criteria for REIT Selection:

• Management with $1B+ in assets under management
• Proven track record of value creation through market cycles
• Conservative debt-to-equity ratios below 40%
• Transparent reporting aligned with institutional standards

High-Value Investment Opportunities:

Store Capital Analysis (Buffett's $377M investment):

• Business Model: Sale-leaseback transactions with investment-grade tenants
• Portfolio Quality: 2,500+ properties across 49 states
• Tenant Profile: Primarily service-oriented, recession-resistant businesses
• Investment Merit: 5.2% dividend yield with 20-year average lease terms

Seritage Growth Properties (Buffett's strategic value play):

• Value Creation Strategy: Redevelopment of premium retail locations
• Asset Quality: High-traffic, irreplaceable real estate assets
• Investment Thesis: Long-term transformation of undervalued properties
• Potential Returns: Significant upside through strategic redevelopment

3. Liquidity Premium for Sophisticated Portfolio Management

The Liquidity Advantage: Unlike direct real estate, REITs provide institutional investors with immediate liquidity for tactical allocation adjustments.

Strategic Benefits for High-Net-Worth Investors:

• Rapid position sizing: Deploy or redeploy capital within market hours
• Risk management: Quickly adjust exposure during market volatility
• Opportunity capture: Capitalize on market dislocations immediately
• Estate planning: Simplified transfer and valuation for wealth transfer
• Implementation Strategy for High-Net-Worth Investors

Portfolio Construction Framework

Phase 1: Foundation Building ($500K - $2M)

• Core Allocation: 60% in large-cap, investment-grade REITs
• Diversification: 8-12 positions across 4-6 property sectors
• Risk Management: Focus on dividend aristocrats with 10+ year track records

Phase 2: Strategic Enhancement ($2M - $10M)

• Specialized Exposure: Healthcare, data centers, infrastructure REITs
• International Diversification: 20-30% in global real estate securities
• Tactical Opportunities: Position sizing based on market cycles

Phase 3: Institutional Approach ($10M+)

• Direct REIT Investments: Primary and secondary market opportunities
• Private REITs: Non-traded REITs for institutional investors
• Real Estate Private Equity: Co-investment opportunities with sponsors

Risk Management for Sophisticated Investors

1. Interest Rate Sensitivity: REITs are sensitive to rate changes

• Hedge Strategy: Short-duration bond positions or interest rate swaps
• Diversification: Balance rate-sensitive and rate-resilient sectors

2. Liquidity Management: Maintain 20-30% in highly liquid positions

• Core Holdings: Large-cap REITs with daily trading volume >$50M
• Emergency Liquidity: Maintain positions that can be sold within 24 hours

3. Tax Optimization: REIT dividends are taxed as ordinary income

• Strategy: Hold REITs in tax-advantaged accounts when possible
• Timing: Harvest tax losses strategically for tax-efficient returns

Next Steps: Implementing REIT Investment Strategy for High-Net-Worth REIT Investors

Immediate Actions for Qualified Investors

1. Portfolio Assessment

• Review current real estate allocation and liquidity needs
• Identify gaps in geographic and sector diversification
• Assess risk tolerance and investment timeline

2. Due Diligence Process

• Analyze REIT financial statements and management quality
• Review property portfolios and tenant credit profiles
• Evaluate dividend sustainability and growth prospects

3. Implementation Planning

• Determine optimal position sizing and entry timing
• Coordinate with tax advisor for optimal account placement
• Establish monitoring and rebalancing procedures

Exclusive Consultation for High-Net-Worth Investors

Complimentary Strategy Session (Qualified investors only)

• Duration: 60-minute detailed consultation
• Scope: Custom REIT portfolio recommendations
• Deliverable: Written investment proposal and implementation plan
• Qualification: Investable assets, accredited investor status

Schedule Your Consultation: Contact our  investment team to discuss your specific REIT investment objectives and receive personalized recommendations.

Schedule Your Consultation 

Ready to implement Warren Buffett's institutional-grade REIT strategy? Contact our team today to begin building your custom real estate investment portfolio.

Frequently Asked Questions

What is the dividend payout ratio?

The dividend payout ratio measures the percentage of a company's net income that it distributes to its shareholders through dividends. It is the number of dividends paid to company shareholders relative to a company's income. 
For example, if the earnings per share are $1 and the dividend per share is $0.60. Then, the payout ratio is 60% or 0.6.

What does Warren Buffett Think About Real Estate Investments?

Warren Buffett said, “Real estate can be a good investment under certain circumstances.” Buffett has made several successful real estate investments through his company, including purchasing a large real estate brokerage firm and a mobile home manufacturer. However, Buffett has also cautioned that investing in real estate can be risky, particularly if an investor doesn't have the proper knowledge or resources to evaluate a property. He has advised individual investors to research any real estate investment before committing to it.

Does Warren Buffett invest in REITs?

The short answer is yes. Berkshire Hathaway allocates capital to real estate ownership through REITs. Learn about Warren Buffett's REIT investments below.

What REITs does Warren Buffett own?

Berkshire Hathaway does not allocate capital to direct real estate ownership. Buffett has held a few REITs.
Recent investments:

• Seritage Growth Properties (SRG)
• STORE Capital (STOR).

Historically, he had the following investments - firms have since then been liquidated, bought out, or sold; some of them:

• Vornado (VNO.PK),
• Property Capital Trust,
• HRPT Properties Trust (now Equity Commonwealth),
• General Growth Properties (now Brookfield),
• Tanger Outlets (SKT).

Conclusion

Warren Buffett prefers to invest in REITs instead of real estate because REITs are a great source of passive income, reward-oriented, and more liquid than property ownership.

Aside from following Warren Buffett’s successful principles, REITs can be desirable if you prefer real estate assets over securities but lack significant capital to invest in real property. You can start investing in real estate through REITs for as little as $ 1,000.

 
 
 

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