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I am not alone in my fascination with the 30year fixed rate loan. Warren Buffett, who was in touch with me in 2012 about buying rental homes using these wondrous loans, is also a proponent. There is an article in Entrepreneur magazine by Cheryl Snapp Conner, called“ Want to Become a Millionaire? Follow Warren Buffett ' s 4 Rules”. In the article, the writer refers to the interaction Warren Buffett and I had regarding these loans for investment properties.
I also have several simple criteria of where to buy rental singlefamily homes: Sunbelt States( based on longterm demographic studies), the suburbs of large metropolitan areas, places with a decent ratio between rents and prices, and brandnew homes. I explain the rationale behind these criteria in a series of articles( which I’ ll be happy to share with the readers). The 30year fixed mortgage is so special, and it is so dominant in changing an investor’ s financial future, that it is of primary importance when investing in rental homes. Exactly which city or what location, or even which house you buy, becomes secondary. That is, of course, if it follows the criteria I just presented.
Thus, it is not as important which market you choose. Over the past 38 years, I have seen it time and time again on the hundreds of homes I bought, and on the many thousands of homes that my investors bought. The powerful effect, over the longterm, of simply buying a good home( see criteria above), financing it with
a 30year fixedrate loan, letting a property manager rent it out, and then proceeding to do … nothing, will change your future. Doing nothing, by the way, is one of the hardest things for us. We always want to sell, exchange, wheel and deal, and complicate matters.
Given this, the savvy investor can relax and go where there is inventory. During COVID, there have been inventory shortages in many markets. Since the exact market is of secondary importance, the investor can feel freer to go to any good market where inventory exists.
A corollary to the question about market choice, is the question I get often these days about home prices. I am asked whether the home prices, having gone up in the COVID rush, should preclude
" I am not alone in my fascination with the 30year fixed rate loan. Warren Buffett, who was in touch with me in 2012 about buying rental homes using these wondrous loans, is also a proponent." jumping into rental home acquisitions. People wonder whether they should sit on the sidelines until some markets’ prices go down.
Not only is it not clear that prices will be heading down soon( building materials are getting more expensive and supply chain issues makes building houses more expensive, although that may abate), but, once again, the investor has to consider the fortuitous window we are in: extremely low 30year loan rates, AND an increasing bout of inflation. Missing out locking these rates forever, while also running into higher inflation would be a“ primary miss”. Waiting for a possible price slowdown would be a“ secondary possible optimization”. Thus, I believe the smart investor should jump into investing in rental homes at this time.
ABOUT ICG AND ADIEL GOREL:
For more information about Adiel Gorel and ICG( International Capital Group), go to icgre. com, or follow us on social // Insta: @ adielgorel // YouTube: adielgorel // LinkedIn: adielgorel
For complimentary tickets to our quarterly real estate investment online event, go to icgre. com / event /
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