Warren Buffett Just Endorsed This Investment
Take a deep breath and go for it…
That’s basically what Warren Buffett is telling millions of Americans who are too scared to take the plunge of homeownership.
As you know, Mr. Buffett has made billions investing in undervalued stocks. He loves buying well run companies when they’re trading for a fraction of their true worth.
Right now he thinks residential real estate is the best value out there.
You see, the essence of value investing is buying an investment at less than its intrinsic value. And in many areas of the country, you can actually buy a house for less than it costs to build one. That sounds like a great value to me!
But that’s not all…
According to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI), housing affordability rose to a record level during the fourth quarter of 2011.
The HOI indicated that 75.9% of all new and existing homes sold in the fourth quarter were affordable to families earning the national median income of $64,200.
Simply put, buying a home is the best value investment you can make right now.
Frankly, if you know you’re going to be living in the same area for the next five to 10 years, then you should own your home. It’s the one investment that’s rigged in your favor.
There’s no other investment besides real estate that you can borrow money cheaply and get preferential tax treatment on the interest payments.
It’s the kind of sweetheart deal that Warren Buffett loves to make. Just look at the deal he made with Goldman Sachs (GS) in the days after Lehman Brothers collapsed in 2008.
At a time when the financial crisis had brought the world to its knees, Buffett stepped up his game. He gave the beleaguered investment bank a $5 billion lifeline when everyone else was too paralyzed by fear to take action.
And he was rewarded with $10 billion in fees and interest over the next few years until Goldman paid him back. Most ordinary investors never get to make a deal like that. But right now you can…
As you probably know, the Federal Reserve is actively trying to keep long term interest rates low.
It’s called “Operation Twist”. The Fed’s selling $400 billion in short-term Treasuries and buying the same amount of longer-term bonds. The operation started in October and goes until June of this year.
The twist causes long term interest rates to fall below market value. And getting an interest rate below market value is your chance to get a sweetheart deal.
Let me explain…
According to Bankrate.com (RATE), you can get a 30-year fixed rate mortgage for about 3.8%. On every $100,000 you borrow, you’ll pay back $167,744 ($100,000 loan plus $67,744 in interest) over the life of the loan.
If the rate on a 30-year fixed rate mortgage were to rise to 6.5% (still very low by historical standards) than the same $100,000 mortgage would cost you $127,544 in interest. That’s nearly double the amount of interest over the life of the loan.
To put it another way…
On a $200,000 mortgage, you’re looking at a savings of more than $100,000. And the more money you can afford to borrow at these crazy low rates, the more money you’ll save.
Here’s the thing…
We know Operation Twist is coming to an end in June. And it’s a near certainty long term interest rates will begin to rise as soon as the Fed stops buying.
That means your window of opportunity is closing. You need to act now to get a below market interest rate on a 30-year fixed rate mortgage.
Remember, it takes time to find a house and secure the loan. So don’t delay, jump on this once in a lifetime opportunity! And you too can get a sweetheart deal like Warren Buffett.
Category: Real Estate
