CNBC recently published a great article along with and video interview featuring Warren Buffet. Buffet is known for his massive wealth and financial acuity as Chairman and CEO of Berkshire Hathaway. Quite simply, he’s one of the sharpest financial minds today.
So, it was interesting when Buffet revealed in this interview that he utilized a 30-year mortgage loan to purchase one of his early real estate investments in Laguna Beach. He then used the equity from the property and the cash he kept in pocket in order to purchase Berkshire Hathaway.
A Powerful Investment
Buffet is currently selling the Laguna Beach home that he originally bought it in 1971 for $150,000. He is now asking for $11 million!
“When I bought it for $150,000, I borrowed some money,” Buffet explains. “I thought I could probably do better with the money than have it be an all equity purchase of the house.”
Buffet acknowledges that for most people, a home is the most important (and expensive) investment they will make. However, it is an excellent long-term investment. He notes that one of the most appealing parts of a real estate investment is the option of a 30-year mortgage.
“If you get a 30-year mortgage, it’s the best instrument in the world because if you’re wrong and rates go to 2 percent, which I don’t think they will, you pay it off,” he says. “It’s a one-way renegotiation. I mean it is an incredibly attractive instrument for the homeowner and you’ve got a one-way bet.”
During the term of the loan, Buffet was able to borrow from the rising equity. He estimates somewhere between $110,000-$120,000 was borrowed during the time he was purchasing Berkshire Hathaway. That money paid for 3,000 shares in the company, which are now collectively worth roughly $750 million today.
Buffet’s experience shows the true value of a 30-year mortgage loan or a well-timed home refinance. Most people won’t turn the investment into his type of money, but there are many advantages to having a long-term loan to invest in real estate. Whether it’s just your own family’s home or part of your investment portfolio, you can put the power of a 30-year mortgage to work for you.
Explore Your 30-Year Mortgage Options
To learn more about the advantages of a 30-year mortgage loan, contact Transparent Mortgage today for no-obligation mortgage consultation.