When one of the richest men in the world decides to recommend buying single family homes with 30 year fixed rate financing, Nomads would be smart to listen (you can watch the video clip below).
Warren Buffett, during a television interview with CNBC, talks about how he'd buy a couple hundred thousand single family homes if he could figure out the property management. He says, “he'd load up on them.”
For Nomads, we're not recommending you buy a couple hundred thousand single family homes… but you're probably not Warren Buffett. Instead, we're suggesting maybe you buy 1 and see how it goes. It if makes sense after attending all 50 different classes, buy another. If, instead, you decide “James is crazy and I don't know what I was thinking”, you've still got a single home you've bought that you can live in, rent out, or sell. No harm, no foul and since the average net worth of a home owner is 36 times that of a renter, you probably did yourself a favor anyway.
In a recent NY Times article on How Homeownership Become the Engine of American Inequality they tell us home ownership is a proven wealth builder and savings compeller:
Warren goes on to talk about how he'd take out mortgages at very, very low rates. Well… that would be now. I show in the class we do on interest rates with charts just how low interest rates are right now. He explains how if you get a 30 year mortgage and it turns out interest rates were too high, you can refinance it next week. If it turns out interest rates were too low, the “other guy” (presumably the bank in this case) is stuck with it for 30 years. He says, “it is a very attractive asset class now.”
The host then asks Warren: if you were a young investor and you had the choice to buy a home or stocks, which would you invest in? Warren Buffett's answer is clear: if he knew he'd be living in that same area for 5 years or so, he'd buy a home with a 30 year mortgage. He tells us it is a terrific deal.
If only Warren was a “handy type” (which is readily admits he is not), he says if he could buy a couple single family homes at distressed prices with 30 year mortgages it is a leveraged way to buy a very cheap asset.
Watch the 1 minute 23 second video below: