Author Topic: Buffett house in market - Laguna Beach CA  (Read 5216 times)

John Hjorth

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Re: Buffett house in market - Laguna Beach CA
« Reply #20 on: June 13, 2017, 12:36:06 PM »
Thanks for the reminder.
For BH now, numbers are really big.
My comment also had to do with our own individual assessments of specific circumstances versus leverage and opportunity set.
Mr. Buffett is the Master.
As individuals, we adapt (try to) to circumstances which are fluid.
From my perspective, in 2007, I had zero investment leverage or otherwise. In 2008-9, I had a lot.
And now it feels like 2007. Maybe it's all bias.
I have looked at recreational properties around my area. The price to value is in correlation to all assets in general.
Maybe, it's all because of low interest rates.
But I wouldn't bet on it.

Yes Cigarbutt,

At that time [1971], Berkshire was "mixed bolts": A really crappy textile business [in clear hindsight], NICO bought about 4 years earlier at about USD 8.6 M [better than gold in clear hindsight, statutory policy holders' surplus at end of september 2016 USD 92,147,890,603 - why does that page not get a quarterly update? - I suppose the figure is so large, that nobody bother to update it any longer?], and a bank, that later got spun off.

Mr. Buffett was actually levering up, using that mortgage to get more skin in his own game.
« Last Edit: June 13, 2017, 12:41:34 PM by John Hjorth »
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Cigarbutt

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Re: Buffett house in market - Laguna Beach CA
« Reply #21 on: September 03, 2017, 04:37:42 AM »
This kind of follow-up perhaps has little value as they just recorded man-made seismic activity near North Korea but the following recent link shows an interesting parallel to what Mr. Buffett did many years ago.

http://www.businessinsider.com/beyonce-jay-z-new-house-los-angeles-mortgage-2017-8

This is not about envy and I think that both are artistically very talented but this is really a head scratcher for me.
I doubt that they will do as well as the Oracle, financially speaking, and, worse comes to worse, even if they lose the house, it would not be the end of the world or a Johnny Depp moment but, still, I am amazed at the general complacency about debt and the reaching for yield with eyes wide shut mentality.

My thinking (and biases) suggests that this has percolated down fairly deep.

When we collectively look back at this period maybe we'll say: "It was the best of times. It was the worst of times".
Maybe Dickens had something going then.

globalfinancepartners

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Re: Buffett house in market - Laguna Beach CA
« Reply #22 on: September 03, 2017, 06:27:49 AM »
Well, I'm sure they won't do as well appreciation-wise as Warren did with his modest purchases of seaside real estate in California before a generation of repricing that made virtually every owner of oceanfront property in California a multi millionaire on paper.  I know some old hippy college professors that got just as "lucky."  Of course, to spend it they have to move away from the beach, which is sad.

Should high profile entertainers buy trophy properties in L.A.?  Who knows, I would say if it helps them unload the disaster of Tidal then it will probably pay for itself.  It's worth noting that the asking price was something above $120 million and they paid in the $80's so there is that.  But of course you can ask whatever the hell you want for a property.

As far as the mortgage goes - they both earn their incomes predominantly in very high-tax ways (like a professional athlete).  Beyonce made over $100 million last year with Lemonade, Formation tour and an endorsement operation that has a lot of room to expand if she chooses.  As long as that Goldman Sachs mortgage interest remains fully tax deductible, the cost to them is a lot less than the 4% headline rate.  It's probably the most reasonable leverage available to them when you factor in the tax subsidy.

Should they instead have invested in 10% cap rate income producing real estate using the same access to leverage for lifetime income for several generations?  It's a personal decision.  His Champagne company does seem to be doing well, and the Live Nation JV, sports management startup, etc - all seem to be very successful.

I'm a fan of both and still listen to DJ Danger Mouse's remixes of Jay's Black Album with the Beatles White Album - the "grey album" as well as another DJ's remix of the Black Album with Radiohead called "Jaydiohead."  Great stuff those two.

"I check cheddar like a food inspector"  ...

And Lemonade was pretty phenomenal, even without the New Orleans connections.  Almost all the tracks on that album are really great.  (I don't care for the 'I ain't sorry' track but all the rest are A++)

LR1400

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Re: Buffett house in market - Laguna Beach CA
« Reply #23 on: September 08, 2017, 06:58:01 AM »
Thought I could bump this up vs recent comments by Mr. Buffett.
So,
-bought the house for 150 000 in 1971,
-took on a mortgage of +/- 120 000 on it,
-invested the borrowed funds in Berkshire stock,
-which value comes to 750 million these days,
-and now asking 11 million.

Impressive.

These days, one can get a very low fixed rate 30-year mortgage quite easily.
The challenge may be to find something to invest into.
I wonder if BRK now has the same return potential characteristics as in the 1970's.

 https://www.msn.com/en-ca/money/topstories/why-one-of-the-worlds-richest-people-took-out-a-mortgage/ar-AAnNpRy

So is it confirmed that he took money out of his house and invested it in Berkshire?

I'd never heard that before.

globalfinancepartners

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Re: Buffett house in market - Laguna Beach CA
« Reply #24 on: September 08, 2017, 07:09:52 AM »
Its not that he took equity out of his house and invested in Berkshire or any other stock, rather that he used a traditional mortgage at the time of purchase and so the 2nd home purchase took up less of his capital.  Money is fungible, etc etc..