Was Warren Buffett’s $150,000 1971 beach house (on sale/listed now for $11 million) a good or bad investment for him?

For anyone who bought a $150,000 beach house that is on sale for $11 million now could be consider a good investment. (Have a look of this video of the inside of Buffett’s beach house.) But for fame investor Warren Buffett, well, thats different. To Buffett, the same $150,000 in 1971 could become quite a different beast in 2017 over 46 later. In “The Oracle of Omaha is selling. This time it’s real estate” CNBC news reported in March 2017 (emphasis added),

He [Warren Buffett] paid $150,000 for the property back in 1971, which is about $900,000 in today’s dollars.

What you may be surprised to find out is that Buffet, one of the world’s richest people, took out a 30-year mortgage when he bought the 6bedroom, 7 bathroom seaside spot.

 

“When I bought it for $150,000, I borrowed some money from Great Western Savings and Loans. So I probably only had $30,000 of equity in it or something like that – it’s the only mortgage I’ve had for fifty years,” Buffett said.

He added, “I thought I could probably do better with the money than have it be an all equity purchase of the house.”

And indeed he did.

“That $110 or $120 thousand I borrowed, I was buying Berkshire then,” says Buffett.

The businessman says he was constantly buying Berkshire in the early ’70s, when the stock was around $40 a share.

“I might have bought 3,000 shares of Berkshire or something like that from the proceeds of the loan — so that’s [worth] $750 million [today].”

Yes, the 750 million dollars is a mind boggling number as Buffett earned that with the $120,000 he borrowed. In a sense, the $30,000 that he didn’t borrow could have meant $187.5 million if he bought BRK shares instead which is way more than the house list price of $11 million.

At the end of the day, Buffett, his first wife and family plus friends got a lot of enjoyment from the house over the years and that is more than mere “investment” and monetary return.

I remember reading Buffett gifting his three children some BRK shares (not a ton) through grandpa Howard. Warren’s three children could have been “rich” if they had kept onto their shares. BUT that would have been the wrong way to live lives as they have to experience their lives in their own ways instead of holding to “mere money” as none of us can take money away from this earth when we pass on.

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