Proper Ways to Manage a Construction Company
September 16, 201622 Great Tips to Make your Student Room a Home
September 20, 2016Everyone wants to have a home, but for many, this excellent goal is hard to achieve practically. What with high price inflation, and low salaries, the cost of a typical home in the United States is usually 4-5 times the annual wage of a typical worker. Many people throw up their hands in despair, and go for a long term mortgage loan in order to eventually meet their goal of home ownership. Sadly, this goal is often far away, and refinancing, along with recent housing crisis, causes it to not be as tangible as one might wish.
What are the secrets to becoming a home owner outright? For the first tip, Warren Buffett has a general phrase for all who want to practice his billionaire wisdom. “Be fearful when others are greedy and greedy when others are fearful” How does this apply to housing?
When it comes to buying their first home, most people automatically jump to a multi-decade mortgage loan. The mortgage loan industry in the United States is gigantic for this reason, and the government incentives for refinancing are large. Citizens of this country are greedy in this area, judging by Buffett’s principle. Buffett would caution us to be fearful when others are greedy. Now, many people would say, “But how can I get a home then? The prices are so outrageous!”
This brings us to our second secret, sheriff’s and foreclosure auction web sites. Searching Google for auction and foreclosure brings up a lot of gems that just need a little polishing. Many places that are high crime, or have a reputation for being full of certain ethnicities that some are prejudiced against also have a very low price level. A great example is Detroit, Michigan. After the 2008 economic bailout of General Motors, the city of Detroit literally went bankrupt. There are still decent houses in Detroit selling right now for $1000 cash, out of the city’s desperation to sell. As a caveat, sometimes such houses have to be fixed up to code, but this is a far cry from a cracker box mansion that goes for 5 times a worker’s annual salary.
The third secret to home shopping is to look internationally. Sites like Land Watch and Craig’s List are a great place to start. Price levels overseas are usually far lower than in the US. Homes in China, the Philippines, or Mexico, are often within reach for 1 year of savings from a hard American worker. This technique profits from the distortions that are prevalent in global finance. Powerful countries often manipulate their currencies to be artificially high, so people will sell to them. Weak countries manipulate their currencies to be artificially low, so people will buy from them. This leaves a lot of undervalued assets just across the border. If an individual can swallow their patriotic pride, and consider investing overseas, the benefits are often immense.
Now, in selecting your home, it pays to remember what you actually need. Many people buy a home that is a cracker box mansion, but they are only in it for 3 hours a day. This home is pretty much a waste, and a drain on your personal finances. Identify what you actually need. If you need the huge mansion, then great, but the essentials are often met with much less.
Balancing quality and price are important as well. In the Detroit homes above, many people would shy away from such a purchase because of the perception of low quality. However, an ancient Jewish king once observed, “He who builds a high gate invites destruction.” Having a fancy home in a nice neighborhood can often make you a target for vandalism and theft. It is important if your home is nice to have at least a small home warranty, which adds an additional expense to an already overpriced asset. Keeping things simple, and laying aside prejudices can make even the poorest of us happy home owners.