Why the "Oracle of Omaha"- Warren Buffett not invest in real estate "properly"?

Warren Buffett is the world's leading billionaire, also considered a "legend" in the financial field. His success has been proven over the decades with famous investments that have helped Berkshrire Hathaway's profits reach a 20-year record.

If there's one thing that makes Warren Buffett so successful, it's his faith in his investment decisions. Although society has changed, the American billionaire still maintains the investment view is to choose good companies to buy shares and ignore the "predictions" of others about that company. 

However, there is a strange thing when looking at how a lover of long-term investments like Warren Buffett is not interested, that is buying real estate. Especially when that is also how his famous close deputy Charles Munger used to build his fortune.

“Buy” real estate and “invest” in real estate

Warren Buffett is not opposed to investing in real estate, like how he isn't oppose to cryptocurrencies. In fact, he has invested in several real estate investment funds (REITs) over the years. However, he knows that being a real estate investor in the true sense of the word, having his name on the papers, Certificates of land use rights etc. doesn't mean much to him.

Buying and managing real estate is more of a business than an investment. Warren Buffett knows that it is better to spend his time choosing companies to invest in than buying and selling properties in the real estate market on his own.

Real estate is not an easy business. According to most people, to participate in the real estate market will require a large amount of capital. At that time, new investors expect high profits. Many individual investors entering the real estate market think that it will be a form of passive investment and most of these individuals will eventually leave the market after realizing how much they really have to spend.

However, that is the thinking of those who "buy" real estate, treating investment as a normal purchase. In fact, “investing” in real estate is a different story. Passive real estate investing allows investors to reap the rewards of a profitable asset class without spending a lot of time managing it.

Over the past 20 years, there have been 13 years when the FTSE Nareit All Equity REITs have surpassed the S&P 500 in total returns. The average annual rate of return that the FTSE Nareit All Equity Reits index generates is about 13.1%, generated an average annual total return of 13.1%, well above the 11.1% rate generated by the S&P 500.

Some investors have begun turning to the private market for passive real estate investments that offer even higher returns. For example, real estate crowdfunding platform RealtyMogul generated an internal rate of return (IRR) average of 17.2% to investors on fully executed trades since inception.

Passive investors have many options to buy shares of short-term loans to the real estate sector, invest shares in high-cash real estate, help fund large scale development projects or simply invest in a managed fund.

While the potential return may not be as high as buying a home yourself and selling it for a profit, the likelihood of long-term success for most investors is much higher.

The returns obtained through outright ownership of a real estate property are a direct result of the time, effort and money the investor has put in. Although that business has existed for centuries, helping many people get rich quickly, but simply this is not a meaningful and suitable business for everyone because it requires inputs such as large capital, spending a lot of time on investments, etc.