Billionaire Warren Buffett has famously said the first rule of investing is, “Never lose money.” Apartments definitely have the possibility to provide you and your family with this assured profitability and pass the ‘Buffet Test’.
However, not all assets are created equal. I look over hundreds of deals to only buy two or three. With that in mind, I am going to outline how you can determine if multifamily real estate passes this test before you buy.
Don’t have faith, know
First of all, if you’re not willing to shop and do the homework, don’t get into this space. The only way you can be sure apartments you’re looking at will pass the “Buffett Test” is through discipline and comparison.
At the same time, this is where multifamily real estate also has an advantage. If you want to hear how I’ve been making the most of multifamily for more than 30 years, check out my Real Estate Training — for free.
All of the information you need to ensure a deal will make money is readily available.
Multifamily assets have history and records you can review. Everything from the rents the property collected to the debt on it are right there.
What to do once apartments pass the ‘Buffett Test’
I’m not going to go into great detail about cap rates and what debt you should look for here. I have many more articles that answer specific questions better on the real estate section of this website.
Nonetheless, you absolutely need to learn about the market you want to buy in. Then, be sure you do all the math multiple times before you go buying a deal.