4 Real Estate Tips from Warren Buffett

During the years and especially when the real estate bubble collapsed, Warren Buffett

was sharing tips for future home owners though "home flippers" could also find

something useful in his words. Here are top 4 tips we caught from one of the richest

men in the world.
1. Homes DO increase in value over time
Mr. Buffet thinks that the basic premise of home ownership -- that homes increase in

value over time -- is sound. However, the problem [in the housing bubble] is that some

people thought that home prices would only ever go up, which is an extreme corruption

of a generally valid premise. "It's a totally sound premise that houses will become worth

more over time because the dollar becomes worth less," Buffett declared. Another

problem was that people were taking out "liar's loans," buying homes with no down

payment and with unaffordable monthly payments.

2. Buy when it's low but don't wait for too long
This is the strategy Buffett used throughout years to make its fortune and he thinks that

works with homes, too. In one of his annual shareholder letters he wrote after the

bubble burst, the "Oracle of Omaha" said: "Home ownership makes sense for most

Americans, particularly at today's lower prices and bargain interest rates."
At the same time, Buffett argues that potential buyers shouldn't wait for too long

because markets are volatile and impossible to predict in the short term. So, when

conditions make an investment particularly advantageous, go for it. "If you wait for the

robins, Spring will be over," he added.
3. Smart way to own a home - 3 elements
The three elements that made Buffett's manufactured housing holding perform much

better than the rest of the real estate market are fixed mortgage, affordable payments

and long-term hold. According to him, the approach was to get a meaningful down-

payment and gear fixed monthly payments to a sensible percentage of income. As a

result, the company was solvent and buyers kept their houses. He went on to add: "If

home buyers throughout the country had behaved like our buyers, America would not

have had the crisis that it did."
4. Dream homes can easily lead to nightmares
Big homes cost more to maintain. In that sense Buffett thinks that buying a dream home

can easily turn into a nightmare with rapidly adjusting mortgage payments and

unsustainable monthly costs hitting the homeowner's wallet. Buffett warned, "a house

can be a nightmare if the buyer's eyes are bigger than his wallet and if a lender facilitates

his fantasy. 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."
Sound advice, don't you think?
[Via: DailyFinance]

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