Warren Buffett Reveals ‘Big Problem’ With Donald Trump’s Business Learn from the president’s mistakes

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In 1991, legendary investor Warren Buffett was giving a lecture at the University of Notre Dame when he mentioned how Donald Trump made his assets look like they were worth more than they were (1).

Trump’s secret was simple: He locked in mortgages at rates far above their true value, but that meant he also took on significant debt to get them in the first place.

Reflecting on where and how Trump went wrong in his business ventures, Buffett simply observed that “the big problem with Donald Trump was that he was never right.”

And he’s not the only one who thinks so. In fact, Trump’s debts are legendary.

The Washington Post reported that Trump filed for bankruptcy six times during his tenure (2), and CNBC lists Trump: The gameTrump Super Premium Vodka, Trump Magazine and the luxury travel booking site gotrump.com as just some of his bad advice (3).

However, perhaps his most significant—and public—misstep was the purchase of 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 in 1991.

Paying these high interest rates sank the entire project.

The lesson here is that while most Americans will 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 these traps or to bounce back if you do get hit.

In his lecture, Buffett also expressed his belief that “you really don’t need leverage in this world.”

This is great advice. But if you’re still interested in the real estate market, some amount of leverage is necessary for most Americans, especially those looking to buy a home.

These days, home ownership is far from your only option when it comes to investing in real estate. Additionally, the median home payment 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 think about the next 30 years of mortgage payments.

But now there are many ways to get into real estate without leveraging assets or taking on a ton of debt.

Read more: I’m almost 50 and have no retirement savings. Is it too late to catch up?

Read more: Non-millionaires can now invest in this $1B private real estate fund starting at just $10

For example, Arrival’s online platform allows you to invest in rental homes and vacation rental shares without taking on the responsibilities of property management.

Upon arrival, you can browse a curated selection of homes, each evaluated for their appreciation and income potential. Arriving also offers a secondary market, which is open every quarter, so you can change your shares if you need to. Signing up is also easy, just plug in your email, answer some basic questions and you’re ready to start investing.

Once you find a property you like, you can choose the number of shares you want to buy and increase your real estate investment with just $100.

But reaching out is only one way to follow you. Another option is to expand your real estate beyond single unit typologies.

Now, accredited investors can do the same through platforms like Lightstone DIRECT, giving you access to prime 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 private equity investment firms in the United States, 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 investments since 2004.

With Lightstone Direct, you get access to the same multifamily and industrial transactions that Lightstone pursues with its capital.

Here’s the kicker: Lightstone invests at least 20% of its capital in each deal — about four times the industry average. With skin in the game, the company ensures that its profits are directly aligned with its investors.

Given that Buffett is not a fan of borrowing, it is perhaps not surprising that he has made most of his money by investing in companies at low prices.

As he once explained in a letter to his shareholders, “This is the basis of our investment philosophy: never count on a good sale, the purchase price is so attractive that even an average sale gives good results (6).

While it’s hard to find inherent fault with this logic, price isn’t everything. A low price tag may be a sign of a low quality investment.

No matter where you want to invest, Mobi offers expert research and recommendations to help you identify solid, long-term investments backed by advice from veteran hedge fund analysts.

Over four years, and over nearly 400 stock picks, their recommendations beat the S&P 500 by an average of nearly 12%. They also offer a 30-day money-back guarantee.

Mobi’s team spends hundreds of hours sifting through financial news and data to bring you stock and crypto reports delivered directly to you. Their research keeps you up to date on market changes, and it can help you reduce the guesswork behind choosing stocks and ETFs.

Plus, their reports are easy to understand for beginners, so you can become a smart investor in just five minutes.

Before Trump’s political career took off, Buffett also found a flaw in Trump’s strategy regarding debt and liabilities.

In his 1991 lecture, he estimated that Trump “probably owes $3.5 billion now, and if you pick the figures on the value of the assets, it’s probably more like $2.5 billion.”

To avoid such pitfalls, securing a loan that accurately reflects the true value of the property is critical for anyone who is responsible for the loan. But before you take out loans to pick up fresh real estate, it’s probably a good idea to take stock of your finances.

Buffett’s most important message about Trump from his lectures was that Trump’s business foundations were shaky from the start.

And she was really right.

According to an Associated Press report, Judge Arthur Engron ruled in Trump’s civil fraud trial that he engaged in a year-long conspiracy to deceive banks and insurers about the extent of his wealth, and the true value of his assets (8). To avoid this problem, 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 ending up in a similar situation, a financial advisor can help you prepare a solid investment strategy that even Buffett might approve of.

Advisor.com is a free matching service that helps you find a financial advisor who can work with you to create your financial goals, matching you with only the best options. How it works is simple: Just enter some basic information about yourself, like your zip code and financial goals.

Then, from their database of thousands, you are 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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We rely only on verified sources and reliable third-party reporting. For details, see our Institutional Ethics and Guidelines.

Tilson Fund (1); Washington Post (2), (4); CNBC (3); Redfin (5); Unsatisfied (6); Federal Reserve Bank of New York (7); Associated Press (8)

This article provides information only and should not be used as advice. It is provided without warranty of any kind.