Chicago Relocation
 

Tips from The Oracle of Omaha

October 25, 2011

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John D’Ambrogio

What does billionaire, perhaps the most successful investor in history, have to say about the real estate market, and what does it mean to today’s transferees?  http://www.dailyfinance.com recently published some tips from the planet’s third richest guy!

1. The Basic Premise of Home Ownership — That Homes Increase In Value Over Time — Is Sound

Buffett believes  that “the housing bubble was inflated by an irrational, widespread belief that home prices would only ever go up — an extreme corruption of a generally valid premise. ”  This vision has been distorted, Buffet feels, by the misguided notion of “guaranteed appreciation.”

2. Buy Low (so you can sell high!)

Buffett made his life’s fortunes by buying companies at attractive prices with solid growth potential.  Not unlike the long term outlook for housing.   ”Home ownership makes sense for most Americans, particularly at today’s lower prices and bargain interest rates.”

3. Low Prices won’t wait forever (well, maybe for another year or two)

In a Op-Ed piece for the New York Times, Buffet declared that the real estate market  ”will move higher, perhaps substantially so, well before either sentiment or the economy turns up,” Buffett added : “If you wait for the robins, Spring will be over.”

4. The Smart Way to Own a Home Has Three Elements

The keys, according to Buffet, are:

FIXED MORTGAGE

AFFORDABLE PAYMENTS, and

LONG TERM PLAYS (which, obviously, can be hard for a mobile employee)

Buffet hardly has limited his investments to real estates.  For example, when explaining why his manufactured housing holding exceeded the pace of  the rest of the real estate market, Buffett pointed out that “[o]ur approach was simply to get a meaningful down-payment and gear fixed monthly payments to a sensible percentage of income. Sound advice – Don’t be greedy.

5. Don’t chase that “dream home”

No doc, interest only and other “exotic” loans got America (and the world) into a lot more debt that it had ever planned.  See #4 and be realistic!

As Mr. B. succinctly put – “Our country’s social goal should not be to put families into the house of their dreams, but rather to put them into a house they can afford.”

 

 

 

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