Warren Buffett Says Smart Money is in Homes

The Oracle of Omaha, Warren Buffett, sat down for an extensive interview with CNBC last week to share his views on the economy and investing.  It is was a very long interview with the transcript running 73 pages but there were some interesting tidbits that came out of the interview regarding real estate.  Buffett has made billions investing in assets that he felt were undervalued and he feels that single family homes are “cheap” right now.  In fact, he said that if it weren’t such a daunting task he would buy a “couple hundred thousand homes” and take mortgages out on them at “very, very low interest rates.”  As property managers we can appreciate what a large undertaking that would be but we definitely wouldn’t shy away from the opportunity.

Buffett was also asked about whether he would tell a young individual investor to put money in stocks or a home.  Without hesitation he said he would recommend buying a home with a 30 year mortgage because it is a “terrific deal.”  He went on to say that he feels buying a home is “probably as attractive investment as you can make now.”

Ok, so Warren Buffett thinks homes are cheap and the best way to buy them right now is not with cash but a mortgage.  There is a lesson there for investors and people in the market for a primary residence.  At Preferred Residiential we have seen a lot of people from both groups buying homes with cash.  While there isn’t anything necessarily wrong with that, Mr. Buffett (remember, he is really smart when it comes to money), thinks the smart way to buy a home is with a mortgage and so you can spread your cash among multiple properties.  His argument is that if interest rates go lower you can always refinance but if they go up then “the other guy’s stuck with it for 30 years.”

What do you think?  Is he right?  Leave a comment below then give us a call to discuss what you are looking for in the next house you buy.

About Dan Seim

Dan Seim is the primary contributor to Preferred Residential's blog. He has been writing about real estate issues that affect home owners in Bend and Central Oregon since 2011.