Warren Buffett Says Inflation is Coming.
In the annual Berkshire Hathaway shareholder’s meeting, Warren Buffett, the oracle of Omaha, predicted that inflation will hit the US economy due to the financial crisis. Buffett told shareholders, “I haven’t had my taxes raised. My guess is the ultimate price will be paid by a shrinkage of the value of the dollar”.
If Warren is right, and he usually is, the average person can use his wisdom to profit with a smart real estate investment.
- To invest safely, a home buyer should put 20 percent down and take out a 30 year fixed rate mortgage, locking in an interest rate around 4.5 percent. If you haven’t owned a home over the past 3 years, you can cash in immediately with the $8000 tax credit. When inflation hits, your mortgage costs will remain the same, as your salary increases. This means that you have even more money to save and invest later on.
- If you are currently renting, there is another compelling reason to invest. During periods of inflation, rents will rise. If you don’t own a home, your monthly rent obiligations will soar.
- Another reason to invest in real estate is that during times of inflation, home prices appreciate, if even at a slower pace. History shows that during inflationary periods, real estate appreciation tends to beat inflation by 2-3 percentage points.
- Leveraged assets, such as real estate, outperform other asset classes. Leverage magnifies gains because as your income rises, your debt payments will not. You’ll be able to pay off the mortgage with money that is worth less than it was when you borrowed it.
- With home prices and interest rates hovering at historic lows, now may be the perfect time for investor’s to withdraw the cash they have sitting in savings accounts that is paying only a 2-3percent and buy a piece of property. If you buy a property where the tenant covers the expenses and costs of ownership, then the investor can relax and wait for inflation to move up rents and home prices.
InfoTube.net and Warren Buffett agree that inflation, over the next 5 years, is a sure bet. And, when we get rampant inflation, real estate is the perfect hedge. Throw in low prices, cheap money, ridiculously low returns on cash investments and thousands of dollars in tax savings, and you have a powerful case for buying a home now.
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Tags: housing market, housing news, inflation, new rules