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In 1991, legendary investor Warren Buffett was lecturing at the University of Notre Dame when he recounted how Donald Trump made his assets appear to be worth much more than they really were (1).
Trump’s secret was simple: He locked in property loans at prices far higher than their true value, but this meant he also incurred significant debt to acquire them in the first place.
In recounting where and how Trump went astray in his business ventures, Buffett observed simply that “the big problem with Donald Trump was he never went right.”
And he is not the only one to think that. In fact, Trump’s debts are legendary.
The Washington Post reported that Trump has filed for bankruptcy six times during his career (2), and CNBC lists Trump: The Game, Trump Super Premium Vodka, Trump magazine and luxury-travel booking site gotrump.com as just some of his ill-advised ventures (3).
However, perhaps his most significant — and public — misstep was purchasing the Taj Mahal casino in Atlantic City in 1987 (4). Having raised $675 million in high-interest junk bonds to complete the unfinished casino, the Taj Mahal declared bankruptcy by 1991.
Paying off those high-interest rates swamped the whole project.
The lesson here is that while most Americans likely wouldn’t knowingly, or at least willingly, overpay for assets, it can happen to anyone — regardless of the capital involved. Fortunately, there are strategies to avoid falling into those traps or to bounce back if you’ve stumbled.
In his lecture, Buffett also expressed his belief that “you really don’t need leverage in this world.”
That is great advice. But if you’re still drawn to the real estate market, some amount of leverage is often essential for most Americans, particularly those looking to buy a home.
These days, home ownership is far from your only option when it comes to investing in real estate. Besides, the median down payment on a home as of December was $68,000 according to Redfin (5) — down 1.5% — but still a significant chunk of change. And that’s before you start thinking about the next 30 years of mortgage payments.
But there are now several ways to tap into real estate without leveraging assets or taking on tons of debt.
With Arrived, you can browse a curated selection of homes, each vetted for their appreciation and income potential. Arrived also offers a secondary market, which is open every quarter, so you can shuffle your shares if you need to. Sign-up is also easy, just plug in your email, answer some basic questions and you’re ready to start investing.
But Arrived is just one avenue for you to pursue. Another option is to broaden your real estate beyond single-unit typologies.
Now, accredited investors can tap into that same approach through platforms such as Lightstone DIRECT, giving you access to institutional-quality multifamily and industrial real estate — with a minimum investment of $100,000.
Founded in 1986 by David Lichtenstein, Lightstone Group is one of the largest privately held real estate investment firms in the U.S., with more than $12 billion in assets under management.
Over nearly-four decades, their team has delivered strong, risk-adjusted performance across multiple market cycles — including a 27.6% historical net IRR and a 2.54x historical net equity multiple on realized investments since 2004.
Here’s the kicker: Lightstone invests at least 20% of its own capital in every deal — roughly four times the industry average. With skin in the game, the firm ensures its interests are directly aligned with those of its investors.
Given Buffett isn’t a fan of taking on debt, perhaps it’s no surprise he’s made most of his money by investing in companies at low prices.
As he once explained in a letter to his partners, “This is the cornerstone of our investment philosophy: Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results (6).”
While it’s hard to find anything inherently flawed with that logic, price isn’t everything. A low price tag might very well be indicative of a low-quality investment.
If you want the inside scoop on which investments to make, Moby offers expert research and recommendations to help you identify strong, long-term investments backed by advice from former hedge fund analysts.
In four years, and across almost 400 stock picks, their recommendations have beaten the S&P 500 by almost 12% on average. They also offer a 30-day money-back guarantee.
Moby’s team spends hundreds of hours sifting through financial news and data to provide you with stock and crypto reports delivered straight to you. Their research keeps you up-to-the-minute on market shifts, and it can help you reduce the guesswork behind choosing stocks and ETFs.
Before Trump’s political career began, Buffett also found fault with Trump’s strategy when it came to debt and loans.
At his 1991 lecture, he estimated Trump owed “perhaps $3.5 billion now, and, if you had to pick a figure as to the value of the assets, it might be more like $2.5 billion.”
To avoid similar pitfalls, securing a loan that accurately reflects the asset’s true value is critical for anyone looking to manage debt responsibly. But before you take on loans to pick up fresh real estate, it’s probably a good idea to take stock of your financial situation.
Buffett’s overarching message about Trump from his lectures was that Trump’s business foundations were shaky right from the start.
And he was indeed right.
According to a report from the Associated Press, Judge Arthur Engoron ruled in Trump’s civil fraud trial that he engaged in a yearslong conspiracy to deceive banks and insurers about the size of his wealth, and the true value of his properties (8). To avoid this pitfall, it can help to have a team of financial experts in your corner.
For retail investors, this means finding an advisor who has your back, and your best interests in mind.
To avoid winding up in a similar situation, a financial advisor can help you craft a solid investing strategy that even Buffett might approve of.
Advisor.com is a free matching service that helps you find a financial advisor who can collaborate with you to carve out your financial goals, matching you with only the best options for you. How it works is simple: Just put in a bit of basic information about yourself, like your ZIP code and financial goals.
Then, from their database of thousands, you be matched with a pre-screened financial advisor. Even better, you can set up a free no-obligation consultation to see if they really fit your financial goals and go from there.
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