Jul 18, 2024
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Charlie Munger was a generational investing magnate whose life spanned multiple generations. He died at age 99 on November 28, 2023. His legacy is truly iconic, having built several incredible companies over the years — most notably Berkshire Hathaway — alongside the Oracle of Omaha himself, Warren Buffett.
Munger’s mix of humor and profound insight in simplifying complex concepts into sayings that people can understand still resonates with so many investors.
Among Munger's well-known views is that homes should be reserved for families who intend to live in them. At the 1998 Berkshire Hathaway Annual meeting, Munger famously quipped, “The single people, I don't care if they ever get a house."
Regardless of marital status, real estate remains one of the best wealth-building assets for middle-class families. Approximately 45% of household net worth in America is tied to primary residences, with an even larger percentage linked to real estate investments.
Here's what investors should consider about real estate as a long-term asset class.
Plenty of opportunities to consider
For most individuals, the most significant investment one will ever make is in their primary residence.
The ability to take on a highly leveraged position in real estate and grow equity as property values rise over time offers significant financial benefits. Instead of paying rent and having ‘nothing’ to show for it after 30 years, homeowners who make their monthly mortgage payments will accumulate substantial equity by retirement.
This "forced savings" phenomenon is a key reason why most household net worth is tied up in real estate. Real estate is not easy to sell, and refinancing can be costly, so it compels investors to retain the equity they’ve built.
There are several options for those looking to expand their residential real estate portfolio beyond their primary residence or invest in real estate while saving for a down payment.
One top option is Arrived, a platform that allows investors to buy stakes in rental homes and vacation rentals without the typical hassles of home ownership.
Unlike buying a second property directly and taking on substantial debt (with mortgage rates around 7% at the time of writing), investors can choose from a curated selection of homes in specific markets.
This approach offers a more diversified real estate portfolio, something Munger would likely approve of. Impressively, investors can start investing in rental properties with just $100.
Don't overlook commercial options
After establishing a diversified residential real estate portfolio, you might seek additional investment opportunities for further growth. Commercial real estate has been one of the best-performing asset classes in recent decades, often offering higher appreciation and cash flows compared to residential real estate. Consequently, many investors turn to commercial real estate after purchasing their hom.
One option for accredited investors is First National Realty Partners (FNRP) is a top platform for individual investors seeking access to commercial real estate deals typically reserved for institutional investors.
FNRP is rapidly growing and offers institutional-quality properties leased by blue-chip retailers who are integral to their communities.Investors benefit from a triple net (NNN) leasing structure, which can ensure stable cash flows even during economic turmoil. This structure protects investors from rising tenant costs, which is particularly advantageous during periods of high inflation.
FNRP’s team of experts manages every aspect of the investment life cycle, from due diligence and leasing to property management and value enhancement. This comprehensive management can result in increased cash flow and greater returns over time — a winning combination for investors.
Private REITs
A real estate investment trust (REIT) owns, operates, or finances income-producing real estate across various property sectors. REITs allow individuals to invest in large-scale, income-generating real estate without having to buy and manage properties themselves.
Publicly traded REITs offer several benefits, including high liquidity, ease of purchase through stock exchanges, and the ability to diversify across various real estate sectors. But they’re also subject to stock market volatility. This exposure to market fluctuations can be a drawback for investors seeking more stable returns.
In contrast, Fundrise eREITs are private real estate investments, which shield them from the day-to-day volatility of public markets.
Fundrise offers access to high-quality real estate typically reserved for institutional investors and can suggest a portfolio best suited to your investment needs — all with a low minimum investment starting at just $10.
This allows for greater stability and the potential for higher long-term returns, making Fundrise an attractive option for those looking to invest in real estate without the ups and downs of the stock market.
Chris MacDonald is an experienced financial journalist, covering companies across various industries and markets. His love of finance led him to pursue an MBA in finance and move on to the world of financial analysis in the venture capital and corporate finance worlds.
