Donald Trump’s Poor Real Estate Investments Depleted His Wealth Threefold
Earlier this week, Donald Trump warned Americans not to invest in the stock market, reiterating his prediction that a “massive recession” is upon us. This is despite the fact that he’s admitted to never being one for stocks. But when it comes to real estate, his investments have been plenty, though an analysis in the Washington Post shows us that quantity does not equal quality in this case. In fact, “had his portfolio kept pace with the real estate market over the past 40 years, he would be worth about three times as much today.”
John Griffin, a real-estate investor and professor at the University of Texas at Austin, examined real-estate investment trusts (REITs), which are managed by real estate experts who turn profits for their clients by buying and selling interest in commercial property. According to Griffin’s calculations, based on the 14.4 percent that the index has earned since 1976, Donald Trump should have been able to turn the $200 million he claimed to have 40 years ago into $23 billion by last year. Even if outside estimates were more accurate–Business Week put Trump’s 1978 net worth at $100 million–Trump still would be worth about $6 billion today had he invested that money in stocks. By comparison, Bloomberg estimates that he’s worth $2.9 billion today.
When factoring in Trump’s extreme borrowing habits, these figures seem even more optimistic than the reality. “In general, an investor who borrows heavily should perform better than average, since the person has more money to invest. Investors can pocket the difference between the interest paid to the bank on loans and the returns on the investments they make with the money, if they’re good investments,” the Journal reports. But in Trump’s case, he borrowed heavily to finance his real estate projects, many of which ended in bankruptcy. One account from 2000 said that loans for his businesses were 69 percent of what he put in of his own money. The average for the real estate index is 36 percent.
And if that isn’t enough to illustrate his poor judgement and lack of knowledge, as reported by WNYC, Trump also seemed to be completely unaware of the 2006 real estate bubble that brought devastation to so many. In a 2006 audio course recorded for his now defunct Trump University, Trump was asked if he saw doom and gloom on the horizon. The Donald’s reply: “I don’t think that’ll happen. I’m not a believer that the real estate market is going to take a big hit.” The market, in fact, had already started its plummet.
“Trump was so out of touch, he opened a mortgage company just as the nation began to acknowledge that most real estate was overvalued,” writes WNYC.
[Via Washington Post and WNYC]
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