What the Insane Appreciation of Warren Buffett’s CA Beach House Can Teach Us All

It seems that even when famed investor Warren Buffett isn’t trying to make money, he does anyway. Case in point: the Laguna Beach, CA, home that he picked up in 1971 for $150,000. Buffett just listed the six-bedroom, 6.5-bath property for sale, and today’s price tag is a whopping $11 million.

Buffett, a longtime resident of Omaha, NE, wasn’t thinking ahead to a payday when he bought the place. He told the Wall Street Journal that he purchased the place just because his first wife, Susan, liked it. At the time, Laguna Beach “wasn’t fully developed,” he said—certainly not the ritzy enclave it is now.

The reason Buffett is selling now is that the family hasn’t gone there as much since Susan’s death in 2004, he said.

“While the family used to go there during the summers and for holidays, in the past 10 years they haven’t used it as much, and that’s why they’ve elected to sell it,” says listing agent Bill Dolby, of Villa Real Estate.

That pragmatic attitude is typical of Buffett, who earned his nickname “The Oracle of Omaha” with his winning investment strategy rooted in a down-to-earth attitude. In fact, we can see the proof of some of his most famous advice in the way he approached this home’s purchase and sale. Let’s take a look, shall we?

Listen only to those you know and trust

We’re guessing that anyone married to Buffett was quite savvy, so he had good reason to listen to Susan’s preference for this house—she clearly had an eye for good real estate.

Know the difference between price and value

Even though he said he wasn’t thinking of the house as an investment, a guy like Buffett must have thought about what he was getting for the money. After all, $150,000 in 1971 is the equivalent of almost $900,000 today, according to the Bureau of Labor Statistics’ inflation calculator. So, it wasn’t chump change. But while the town may have been no big deal at the time, the home’s nice layout and its proximity to the beach and to Los Angeles clearly offered value.

Buy, then hold forever (almost)

As Buffett told shareholders of his company, Berkshire Hathaway Inc., in a 1989 letter, “Time is the friend of the wonderful business, the enemy of the mediocre.” It’s a friend of the real estate investor, too—anyone who buys a good-value property and holds it for 46 years is likely to do well with it. Even if he had a 30-year mortgage, he’s long since paid it off.

Buy what you want to own

Again, Buffett didn’t buy this house because he wanted to win big in Southern California real estate—he just wanted a nice getaway for his family. He, Susan, and their three kids vacationed at this home for more than four decades, spending summers and Christmases there. Viewed that way, he’s more than gotten his money’s worth, regardless of the appreciation.

Invest in what you know

As one of the listing photos shows, there’s a cardboard cutout of Mary See, a founder of California-based See’s Candies, in the living room. Berkshire Hathaway purchased the confectionery company in 1972—one year after Buffett snapped up the Laguna Beach home. Could it be that he discovered the locally made chocolates while on vacation in California and loved them so much he bought the company?

The Laguna Beach house was originally built in 1936, but the Buffetts remodeled several times, expanding the square footage, according to Dolby. Now the house features views from almost every room, numerous decks, en suite bathrooms, and a large family room with an oversize viewing deck. Plus, there’s covered parking for three cars, rare in these parts.

Still, whoever buys the place might be up for a little remodeling.

“In my experience in Emerald Bay, I’ve seen all kinds of things,” says Dolby. “The new owners could either keep it as is, remodel, or tear the whole thing down and rebuild.”

But if the new owners want to maximize the return on their investment, they’d do well to keep its previous owner’s advice in mind.