Mr. Buffet is among the most successful investors in the world. The "Oracle of Omaha" has grown his Berkshire Hathaway Corporation from tiny to billions of dollars of increased net worth and income.
Primarily he uses a value approach. Generally this means buying when prices are low and holding the assets while prices and income both increase. All with strong management taking care of the assets, which in his case, are typically businesses.
For the "official" information on this amazing growth, and a great marketing lesson as well, slip on over to . (Later, not right now!)
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So what does this have to do with buying houses? March 2012, home prices in Orange County, CA are as low as we have seen in many years. Not just in absolute price, but more dramatically, in price to income.
And interest rates are as low as we've seen in over 50 years. With good credit, one can get 30 year fixed rate financing between 3.5% and 4%!
Low rates make for low payments. Low prices make for low payments. And at the same time, rental rates are increasing. This is a great situation for investors to buy and hold property.
For the first time in many years, it is possible to find positive cash flow investment homes in Orange County with moderate loan amounts. When you buy for all cash, you will find your ROI is from 5% to 10% cash on cash. If you finance, the rate of return will rise, but so does the risk as the mortgage payments continue whether your tenant pays the rent or not.
If you wish to consider a middle ground, there are opportunities to get returns from 5% to 8% or so, paid as interest on your funds used to finance the property PLUS you get an equity kicker (25% to as much as 50%) of the value increase over the next ten years. Stable income. Bonus on liquidation.
There are also opportunities to have all this happen for you with a fully passive investment on your part. You buy for cash, and the property is managed for you by state licensed professionals. It is as simple as a bank CD account and perhaps more secure as you have insured title and equity in a real estate asset.
Check with your tax adviser about using your self-directed IRA or 401K plan to eliminate or delay taxation on these investments. For example, using a self-directed Roth retirement plan could mean a future of tax free income once you reach your retirement age.
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