Family and Finances: Episode 9, Part 3

Well, what financial state should we be in before investing in real estate? A very good one. When I say that, I think we talked about that earlier, you need to be in a good place relationally because of the stress it will put on your family, and you need to be in a good place financially so that the house doesn't become the center of your universe. It can start to consume all of your time, all of your energy, all of your resources, and we would say, look, the 20% down payment, no PMI, no adjustable rate mortgage, and at least $10,000 in the bank going into it so you can fix it up without going into debt. And I should have been more clear. When I say investing, I mean, I'm thinking flips. Oh, okay. What condition should you be in before you flip a house? Flips, all right, let me say this. Flips or rentals? Yeah, buying to basically want to get into real estate as your side gig. Investment, yeah. Yeah. Well, my father did that. My father at one time owned 30 houses, and he was a professional accountant, very good with numbers, very good administrator and manager. And I asked him just recently, Dad, you've sold all of your rental houses, would you do that again? And he said, never. And I said, why? I thought you did so well. One point they were worth millions of dollars, and he said, I think I ended up spending more time and agony and stress and frustration than it was worth. People abused the houses, they tore them up. He wasn't in a market segment that people respected the homes. He bought in a way that he thought he could make the most value flipping, and it didn't

work at all. No, I remember one renter didn't put a shower curtain up. The whole time? The whole time. And the shower fell through the floor. That was awful. Yeah. And then they move out, and they have a $1,000 deposit, and you've got a $10,000 repair. So I learned a lot watching Dad do that. What's popular right now, you nearly need to be strong financially. I would say you probably don't ever need to have two mortgages. So if you're going to buy a rental property to flip, you either need to pay for that one in cash or have your primary home paid for in cash. Because two mortgages at the same time will consume a lot of your credit availability, and you're at great risk. You've become much more cautious. And so if I were going to flip houses, I would only buy something I could pay for in cash to flip and fix up with cash. And that's a high bar to set, but at least you wouldn't get in trouble if it goes backwards on you. Okay. What about if you have other things you could sell to cover the house? Yeah, well, if you've got other assets to cover it. Yeah, liquid things. Okay. I didn't hear you when you said cash. I just wanted to verify that. No, I'm just saying don't go into debt to try to flip houses. Some people say, well, I've got 50% down. That may work.

But look, we've got friends right here where we live who've told us they have been hurt really bad trying to flip houses. Okay. So what home features are worth investing in for resale? Do the research. You and I didn't do the research. And so we would just fix a home the way. We wanted it, oblivious to the fact that you have to be thinking about resale. In today's world, people can look at 1,000 houses on a weekend online, and they would just rule them out if they don't look a certain way. So you may think, well, I'm going to paint this house the colors I want. And so you may paint the kid's bedroom purple and, you know, a study red and all the things you like, but that doesn't help your resale. So you have to study what people want in the market today. Obviously, they want good kitchens. Most of that is money that you will not only get back but possibly make money on. They want living space, like really good master bathrooms, good closet space, good storage space. One of the things that we did, Ann, is we made improvements to a house without improving the square footage. And so we got our cost per square foot higher than the market would bear. And that's a really important factor. Today, you can know the average resale cost per square foot and then back into those improvement decisions. Take, for instance, a swimming pool. Most experts will tell you a swimming pool does not help with your value of your home. It may help the resale value, but you You usually don't get your money back out of what you pay on a pool, so be very careful on that. And I've read that there are some basics that all buyers expect.

They want a good roof, they expect a well-working HVAC system, you know, those kind of things. So you've got to leave room to make repairs, siding. Yeah, to keep the home up. That's been our strategy, to try to keep the home in very nice condition and be somewhat neutral about the things that we do to improve it so that somebody else might like that in the future. Because it's all transitory. Very few people live in the same place today for 30 or 40 or 50 years. And so you have to be thinking ahead and watch your costs very carefully. So Chuck, why don't you just review some of the basic advice. Can you sum it up for us? Yeah, in summary, it's the biggest purchase you're going to make in your life, so be slow. Never get in a hurry. There's real estate fever right now. There's fewer homes on the market in the United States today than in 1982. So that means this low interest rate has caused people to make the decision to buy. So there's not a great inventory selection. And prices are going up. So even though costs are low, prices are higher, and inventory is low. So be very, very careful. Don't buy anything unless you're in absolute agreement with your spouse that this is a good time emotionally, that you're both ready for it, and that you're prepared financially. If you've done those things, then it can be an absolute joy and something that God rewards you with. You've exercised wisdom in how you've made this purchase. Think about giving it time to appreciate, so that after you've lived there for five to seven years, whatever the average is today, that it's gone up in value. And that will accumulate equity, and that will allow you to, the next home, pay it more down for, the next home, the next home, and eventually, you will actually be able to be in a home without having any debt on it.

A lot of people assume that home ownership is the American dream. Do you agree? I don't agree with that. It is the thing that has helped Americans have more wealth than most of the rest of the world, because we accumulate assets in our home, and as long as those values keep appreciating, it's very helpful to us. But that's not the American dream. In fact, you know, there's a parable of the farmer in the scripture who had a barn that was nice, and he wanted a bigger barn, and he stated that, hey, I'll tear this down and get a bigger one so that I can eat, drink, and be merry. And I think he was sort of expressing the idea of the American dream, and the Lord said, well, today, you die, you lose all of that. So we don't ever want to get caught up in it, it's temporal. Our eternal home is more important. I like to see people put God's kingdom first, and make giving their highest priority, live beneath their means. You remind me of a story that I need to tell, but to be a good steward and not get caught up in where you live, what it looks like, and place too much emphasis on that. Yeah, it's easy to put our identity in our homes, and that's not where it should be. Yeah, it's very easy. You know, you want it to reflect your values. I think modesty and humility are so important. Chuck, do you remember the home we visited in Dallas about 20 years ago? Well, how vividly I remember that, and I haven't told that story in a long time, but we had just joined staff with Crown. We were responsible for raising our own support. We had four children, and we felt very poor and vulnerable, and we were invited to go to a dinner at a home. We pulled up, and they had valet parking. We went in the house, and I think it was the biggest we'd ever been in in our lives.

It may still be. I don't know. Maybe 20,000 square feet, five or six acres in town. It had a bowling alley, a baseball field. It had a three-story library rotunda with the ladders going up. I mean, rare paintings. It was what I described as jaw-dropping, and I remember we left the party. There were only about 20 couples there. We had the valet come and bring our dirty little used car, and we got in our used car, and I thought, oh, my goodness. You know, we felt so poor after being in there, and I thought you were going to talk to me about, did we make the right decision? And going into ministry and not ever being able to have something like that and so I said to you What do you think in do you remember what you said to me? No, I don't remember exactly You said if man can build a house like that imagine what the mansions in heaven are gonna be like And I remember looking at you and I thought thank you. I don't feel any pressure at all I don't feel pressure to get my mansion on earth and you were you weren't you weren't overly impressed It was a beautiful home But we didn't have to have it to feel good about ourselves No, we can appreciate beauty. God created things with beauty, but we have to keep an eternal perspective Yeah, and so I'm much more interested in that mansion to come than I am the one we might Temporarily possess on earth. Yes. Thank you. And I hope this has helped people. Thanks for bringing in some of those questions today It's been fun. Thanks You