Today’s installment from the recent Financial Training Day comes from Bill Simmonds, one of our pastors in West Seattle.

Pastor Bill is a retired airline pilot and former real estate agent. He has 35 years of experience investing in the Seattle market, including apartments, houses, storage, etc. Here is his advice about buying a home, investing in real estate, and finances in general.

Along with educating yourself on the market and the process, study what the Bible has to say about people and their cash. It is a subject God thoroughly understands, and his Word always offers good counsel.

• Don’t borrow from anyone without understanding and accepting this dynamic. Becoming a slave means giving up freedom, and the more you borrow the worse it gets (Prov. 22:7).
• In the book of Hebrews, God eloquently draws the line between our source of true contentment and the illusion that money can somehow make us happy. Study your motivations, and cover your financial decisions with prayer (Heb. 13:5).
• God does not prohibit financial gain, but warns us that it can become a source of pride and idolatry (Deut. 8:17 ).
• Consider the following advice, and then seek additional counsel from people you respect who have some experience and success in your field of interest (Prov. 15:22).

Buying vs. Renting

Right now, my general recommendation is to continue renting because of the large disparity between the cost of owning and the cost of renting. The difference is more complicated than simply comparing rent payment to house payment.

Buying and selling costs roughly 10 percent, and represents a significant loss if you sell for the same price you paid. You have to make 10 percent just to break even! Maintenance and repair costs, taxes, and insurance also add up.

Consider all the costs. Why not rent a home that meets your needs, and save the difference between the actual rent and the monthly payment you are willing and able to commit to? This strategy allows you to “feel” the payment without being tied to it, and gives the market some time to stabilize before you buy.

Investing

If you are thinking of real estate as an investment, buy and hold single or multi-family residential property that generates a reasonable return on your investment, based primarily on the rent it generates.

Stay at the low end in terms of cost per unit. This will optimize cap rate. Avoid speculation based on increasing values, either in vacant property or single-family homes, unless you have very deep pockets and an equally strong stomach.

Play to your own strengths as you formulate a strategy. Don’t buy a fixer if you’re not sure which end of the hammer hits the nail. The deal has to make sense to you, whatever it is.

Financing

Whether purchasing a home or real estate for investment, put as much down as possible. The most compelling offer to purchase is an “all cash” offer, but if you must borrow, the less you borrow the better. There are several advantages to putting the maximum amount down, including:

For those at Mars Hill Church, I am happy to discuss any of these matters–biblical and financial–in person. Please contact the West Seattle campus to get in touch.