In a revealing interview last year, Shark Tank investor Robert Herjavec shared a piece of financial wisdom from the late Charlie Munger that has guided his approach to building wealth: never sell a house. Herjavec, known for his sharp business acumen on the ABC reality show, recounted the advice during an appearance on the School of Hard Knocks podcast, emphasizing how holding onto real estate has been key to his financial success.
Herjavec, who immigrated to Canada from Croatia as a child and rose from humble beginnings to found cybersecurity firm BRAK Systems, which he sold for $30 million in 2000, has long credited ownership and strategic exits for his fortune. In the podcast, when asked about the most money he made in a single year, he responded bluntly:
"$500 million," Herjavec said. "But that included the sale of a business in capital gains. On an income basis, I probably $18 million. But here's the key. You can get very rich making income. It's very hard to get wealthy making a big income. You got to have capital gains."This distinction, he explained, underscores why salary alone rarely leads to true wealth, while capital gains from assets like businesses and properties do.
The conversation then shifted to Herjavec's investment habits, where he admitted he's not heavily focused on stocks. "I'm not a big investor in stocks," he said, noting that while he holds some positions there, his preferences lie elsewhere. It was in this context that he brought up Munger, the longtime vice chairman of Berkshire Hathaway and close associate of Warren Buffett, who passed away in November 2023 at age 99.
According to Herjavec, Munger pulled him aside once and delivered the straightforward counsel:
"Charlie Munger said to me one time, ‘If you want to become rich in life, never sell a house. Always keep every house.'"Munger, renowned for his multidisciplinary thinking and value investing principles, often advocated for long-term holdings in quality assets, a philosophy that aligned with his decades-long partnership with Buffett at Berkshire Hathaway, where they built a conglomerate worth hundreds of billions.
Herjavec's endorsement of this real estate strategy stems from his own experiences. "I've never lost money on real estate," he told the podcast hosts. He stressed the importance of patience, adding, "You have to be able to hang on to it. So, if you can hang on to a property for 10 years, for sure you'll make money. The problem is from liquidity if you have to sell it within 10 years." This highlights a common pitfall for investors: the need for quick cash can force sales at inopportune times, eroding potential gains from appreciation and rental income.
Real estate's appeal, as Herjavec described it, lies in its tangible nature and historical performance. Over the past decade, U.S. home prices have risen by an average of about 5% annually, according to data from the Federal Housing Finance Agency, outpacing inflation and providing a hedge against market volatility. Herjavec's approach mirrors that of many self-made millionaires; a 2023 Ramsey Solutions study found that 90% of millionaires attribute their wealth to real estate investments, often through buy-and-hold strategies.
Yet, Herjavec's philosophy extends beyond property lines into his broader business decisions. He drew parallels to sales tactics, warning against rushing into pitches without understanding the client's needs. "People pitch before they understand who they're talking to," he said. Instead, his method involves listening first, then tailoring responses—a patient approach that echoes the real estate mantra of holding through ups and downs.
This mindset has defined Herjavec's career trajectory. After selling BRAK Systems, he founded Herjavec Group, a cybersecurity company that grew to over $200 million in annual revenue before he sold a majority stake to Fishtail in 2019 for an undisclosed sum estimated in the hundreds of millions. Throughout, he maintained a focus on ownership, avoiding the trap of liquidating assets prematurely.
Munger's influence on Herjavec isn't isolated; the investor has cited the Berkshire Hathaway icon as a mentor figure in various interviews. Munger, who amassed a personal fortune exceeding $2 billion, often preached against frequent trading, famously stating in his 1995 essay The Psychology of Human Misjudgment that impatience is a major barrier to wealth accumulation. Herjavec's recounting of the house advice aligns with Munger's known views on compounding value over time.
For those without the capital to buy entire properties, Herjavec's insights point to alternative entry points. Real estate investment trusts (REITs) and crowdfunding platforms like Fundrise allow smaller investors to gain exposure without direct ownership. According to the National Association of Realtors, REITs returned an average of 11.5% annually over the past 25 years, offering liquidity that traditional holdings lack.
Herjavec's story also underscores the role of timing and market cycles. The podcast interview, conducted in 2023 amid rising interest rates that cooled the housing market, serves as a timely reminder. Home sales in the U.S. dropped 18% year-over-year in 2023, per the National Association of Realtors, making long-term holding even more appealing for those who can weather short-term dips.
Critics of the buy-and-hold strategy, however, point to risks like maintenance costs, property taxes, and market downturns. During the 2008 financial crisis, U.S. home values plummeted by up to 30% in some areas, according to Zillow data, testing the resolve of many investors. Herjavec acknowledged this in the interview, noting that liquidity issues often force sales at losses, but he maintained that patience ultimately pays off.
Beyond personal finance, Herjavec's advice resonates in today's economy, where wage growth has lagged behind asset appreciation. The Federal Reserve reports that median household income rose to $74,580 in 2022, yet wealth inequality persists, with the top 10% holding 69% of U.S. assets, largely in real estate and stocks. Herjavec's emphasis on capital gains over income offers a roadmap for aspiring wealth builders.
Looking ahead, Herjavec continues to invest in cybersecurity and appears on Shark Tank, where he has backed over 20 companies since 2006. His net worth, estimated at $300 million by Forbes, stands as testament to the principles he espouses. As interest rates potentially ease in 2024, according to projections from economists at JPMorgan, the real estate market may present new opportunities for those heeding Munger's counsel.
In the end, Herjavec's interview serves as a bridge between Munger's timeless wisdom and practical application. Whether through homes, businesses, or other assets, the message is clear: wealth favors the patient. For everyday investors, it's a call to rethink short-term pressures in favor of enduring value.