When it comes to making money and investing that money in order to secure the future of our dreams, we tend to listen closely to those that have already walked that path. Billionaire money manager John Paulson was interviewed at the Delivering Alpha Conference presented by CNBC and Institutional Investor. If you ever want to pick the mind of a man who has seen millions of dollars exchange hands while becoming responsible for becoming a billionaire himself, then this was that opportunity. During his session he boldly stated:
“I still think, from an individual perspective, the best deal investment you can make is to buy a primary residence that you’re the owner-occupier of.”
Before we get too deep on what John Paulson said, let’s talk about who John Paulson is. Paulson is the person who, back in 2005 and 2006, made a fortune betting that the subprime mortgage mess would cause the real estate market to collapse (we all remember how that turned out). He understands how the housing market works and knows when to buy and when to sell (like any good investor). What do others think of Paulson?
According to Forbes, John Paulson is:
“A multibillionaire hedge fund operator and the investment genius.”
According to the Wall Street Journal, Paulson is:
“A hedge fund tycoon who made his name, and a fortune, betting against subprime mortgages when no one else even knew what they were.”
So, why does John Paulson believe so vehemently that homeownership is such a great investment? He made his fortune watching homeownership almost take down an entire nation.
Well, Paulson breaks down the math of homeownership as an investment:
“Today financing costs are extraordinarily low.”
Of course, the latest numbers from Freddie Mac supports this claim as they show that you can still get a 30-year mortgage for less than 4%.
“And if you put down, let’s say, 10 percent and the house is up 5 percent,” as many experts predict, “then you would be up 50 percent on your investment.”
How many are seeing a 50% return on a cash investment right now? Be honest.
No one is.
Paulson goes on to compare the long term financial benefits of owning verses renting:
“And you’ve locked in the cost over the next 30 years. And today the cost of owning is somewhat less than the cost of renting. And if you rent, the rent goes up every year. But if you buy a 30-year mortgage, the cost is fixed.”
Like we said earlier, when a billionaire decides to open their mouths they generally have something to say that is worth hearing. This goes double for investment advice. Real Estate is the best investment and this billionaire gave very simple advice – if you don’t yet live in your own home, go buy one.