Hello. My name’s Nelson Arata (PH), I’m from Southern California. And I have a question. It’s not really related to intrinsic value or any of that stock stuff, but more on — (laughter) — houses. I’m still quite young, I don’t have a house yet and I’m thinking about buying a house someday soon.
And in order to do that I’m going to have to put a down payment, which means I might have to sell my shares. And I was wondering if you can provide some insight on when is the best time to buy a house and how much down payment — (laughter) — you should be putting down, in relation to interest rates and also in relation to available cash and the stock market. WARREN BUFFETT
Well, Charlie’s going to give you an answer to that in a second. I’ll just relay one story, which was when I got married we did have about $10,000 starting off, and I told Susie, I said, “Now, you know, there’s two choices, it’s up to you. We can either buy a house, which will use up all my capital and clean me out, and it’ll be like a carpenter who’s had his tools taken away for him. (Laughs) “Or you can let me work on this and someday, who knows, maybe I’ll even buy a little bit larger house than would otherwise be the case.” So she was very understanding on that point. And we waited until 1956. We got married in 1952.
And I decided to buy a house when it was about — when the down payment was about 10 percent or so of my net worth, because I really felt I wanted to use the capital for other purposes. But that was a way different environment in terms of what was available to buy. In effect, if you have the house you want to buy, you know, I definitely believe in just going out and probably getting the job done. But in effect, you’re probably making something in the area of a 7 or 8 percent investment, implicitly, when you do it. So you know, you’ll have to figure out your own equation from that. Charlie probably has better advice on that. He’s a big homeowner — (laughter) — in both senses of the word. CHARLIE MUNGER
I think the time to buy a house is when you need one. (Laughter) WARREN BUFFETT
And when do you need one? CHARLIE MUNGER
Well, I have very old-fashioned ideas on that, too. The single people, I don’t care if they ever get a house. (Laughter) WARREN BUFFETT
When do you need one if you’re married, Charlie? I’ll follow up for the — (Laughter) You need one when your wife wants one. CHARLIE MUNGER
Yeah, yes. (Laughter) I think you’ve got that exactly right. (Laughter) VOICE
Mr. Buffett? WARREN BUFFETT
May I make an announcement? WARREN BUFFETT
Gregory Crawford needs to go to the security office, please, for emergency message. Gregory Crawford to the security office for emergency message. Thank you. WARREN BUFFETT
OK, hope it isn’t a margin call. (Laughter) OK, we’ll go to zone 1, please.
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