At first glance, it might seem like legendary investor Warren Buffett isn’t a fan of real estate. In which case, I get it.
I did complain last year how he missed a perfect opportunity to discuss real estate investment trusts (“REITs”), after all. And he has made comments like “real estate is more of a commodity than a great business.”
However, Buffett is also the man who famously looks for “economic castles protected by unbreachable moats.” And real estate can provide exactly that, as I show week in and week out here at Wide Moat Research – a company I named after that statement of his.
Real estate is tangible and enduring, with limited supply. When handled properly, it can provide reliable monthly income that’s hard to beat.
Moreover, Buffett knows that. That’s why he has invested in the sector both directly and indirectly, with Berkshire Hathaway (BRK-A)(BRK-B) participating in an entire network of properties and property-related businesses.
It owns both Clayton Homes – America’s largest manufactured housing operator – and residential brokerage Berkshire Hathaway HomeServices. Plus, it has taken stakes in select real estate companies over the years, such as:
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Seritage Growth Properties (SRG), a Sears spinoff that Buffett bought shares of after recognizing its redevelopment potential.
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The now-private Store Capital (formerly traded under the ticker symbol STOR), a triple-net REIT that generated secure, inflation-linked cash flow from service-oriented businesses that offered corporate bond-like benefits.
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Lamar Advertising (LAMR), a billboard REIT with an unbreachable moat thanks to legislation that makes it nearly impossible for new competitors to enter the market.
So no, Buffett doesn’t dislike real estate. He’s simply careful about what real estate he chooses.
In which case, I can’t fault him one bit.
The Wide-Moat Mentality
When we talk about wide-moat companies, we’re talking about businesses with defensive properties to ward off competitive attacks.
Think of Coca-Cola (KO), Visa (V), or Apple (AAPL). They’re all well-guarded against rival businesses thanks to carefully constructed branding, economies of scale, distribution networks, and/or first-in advantages.
This makes them the exact kind of businesses that Buffett typically likes to buy.
Most real estate by itself doesn’t offer any such protections. A suburban office, an apartment building, a strip mall… They can all easily be worth something. But that “something” can be easily encroached on by other properties or changing economic factors.
That’s Buffett’s issue.
It’s not that he thinks real estate is worthless. Far from it. Along with the aforementioned companies, he has also owned a 400-acre farm in Nebraska since 1986. Then he went on to add another one in Illinois with 1,500 acres.
It’s also important to point out that Buffett doesn’t think commodities in general are bad investments in and of themselves. It’s just that he doesn’t want to just own an asset.
He wants to own a platform of them with distinct, durable advantages that keep it competitive through thick and thin, like a REIT.
Because a REIT is a company: a collection of real estate assets that can be managed in such a way as to build and maintain a hard-to-beat business. There are plenty of examples I could (and do) point to, like Prologis (PLD) with its logistics network of warehouses that literally help the global economy keep running.
Another easy one is Digital Realty (DLR). It’s the first data-center REIT to go public well before the current AI craze prompted everyone else to enter the game.
And how about Federal Realty, the only REIT on the Dividend King list, which has raised its dividend every year for 58 years straight. That’s thanks to the moat it maintains through the best of the best shopping centers in affluent markets across the U.S.
None of those companies can be classified as mere landlords. They don’t just hold real estate.
They rule from moat-encircled corporate fortresses over physical domains that aren’t changing hands without a serious and prolonged fight.
The Wide-Moat Investing Way
Buffett’s belief in wide-moat investing is grounded in decades of experience that’s every bit as relevant today as it ever was.
This crazy decade we’re in has been filled with business-breaking attacks – one after another after another. The shutdowns in 2020… the out-of-control inflation in 2021… rising interest rates and the Ukraine war in 2022… Trump’s tariffs drama in 2025… and now the war with Iran in 2026.
It’s enough to make a common company crumble, as so many have.
We’re learning a hard lesson on the importance of evaluating investment opportunities for their staying power instead of their “cool” factor. We need assets that produce consistent, competitive cash flow regardless of whether consumer sentiment is up or down, such as:
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Net-lease REITs that deliver steady contractual income from well-established businesses that have proved themselves through numerous economic cycles.
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Data-center REITs that are capitalizing on secular trends like the automation of everything.
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Specialized REITs with management teams that know how to navigate their markets through thick and thin.
Really, management is the key ingredient to any wide-moat company. Buffett has had a lot to say about that over the years, too, including how the strongest companies are run by the most morally vigilant CEOs.
“It takes 20 years to build a reputation,” he noted, “and five minutes to ruin it.” Ipso facto, don’t buy into businesses run by people with big egos or other vices that could be their own undoing… taking your money down with them.
Or, as I explain in The Intelligent REIT Investor Guide, “bad management can destroy value. Good management can add value.”
Fortunately, REITs are set up so that they have to pay out at least 90% of their taxable income as dividends to their shareholders. As such, they tend to have less money to throw around on ego-driven projects.
I’m not saying it’s impossible, mind you. Only that it’s less likely than the average company.
Still, I try to personally meet with as many CEOs as possible to conduct “boots on the ground” interviews before I recommend them. I know that’s not possible for everyone, but you can make up for that lack of direct access by keeping close tabs on their balance sheets, earnings results, and dividend growth prospects.
When it comes to REITs specifically, you should see prudent levels of leverage, disciplined acquisition and development, and capital recycling that adds lasting value – all signs of a well-managed moat.
It’s okay to disagree with Warren Buffett on a comment here or there or even an investment decision. I know I’m not always on the same page as him, as I’ve actively stated before.
But make no mistake of it: His belief in building and buying wide moats is one of the best strategies I’ve ever heard of to build lasting wealth. And real estate, when managed with discipline and properly protected, can be an excellent component of that pursuit.
Regards,
Brad Thomas
Editor, Wide Moat Daily
P.S. Be sure to check out The Wide Moat Show this week, where I highlight four strong Buy REITs that are poised to profit.
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