Buy your children a house NOW!!!
DISCLOSURE: I am not a financial advisor but my wife and I do invest in Real Estate.
My wife and I have owned, flipped, rented multiple homes. During these adventures we decided to get creative and give our first child a house. What if we kept our first house as a rental and gift it to our child when its paid off?
Lets make our first house a rental! At the time it was on a 30 year fixed rate mortgage, low monthly payment, we could use the tax benefits of real estate (consult your accountant), RENT it and make sure it cash flows so we can keep up with maintenance AND when Irie (our firstborn) turns 20 we can gift it to her?
Yes there are multiple college funds and slowly growing investment tools for our children's future, BUT I was not impressed with the return on investment with the 20 year timeline. When I compared them to real estate, everything changed.
So what if we rent the house for 20 years and generously pay the lender/banking institution back. We then have a paid off piece of real estate (asset) that currently cash flows and has benefited us for decades. We imagine with the history of real estate, this property should increase in value. What we paid $60,000 for in 2009 should be worth double in 2033, and with current inflation numbers, hopefully more.
So in March of 2033, I am hoping that the conversation goes something like this. “Irie, Happy 20th Birthday. We are gifting you this house. It is paid off and it Cash flows $1,200 a month. You can continue receiving the rent but you will be the property manager (After 20 years, I will retire as a landlord of this property) OR you can sell this house at the current market value and walk away with $120,000 (guesstimating with inflation) at 20 years old. Our gift to you!!! Now leave us alone… JUST KIDDING!”
I think this is a win win situation. Is it easy? HECK NO! I do have the responsibility of owning this real estate during this time and taking care of the tenants for multiple decades. Warren Buffet says it best, Long term investing is NOT sexy.
Irie has a house in place. Jacob, our second born has a house working for him now and will be paid off in 20 years. We are currently on the search for Marlie’s rental, who recently arrived in October of 2020. They have no idea this is the plan for them but that's the beauty of it.
It is a huge commitment on our part as parents and what this will do for us personally, I can honestly look back and say it was worth it. We owe it to our children.
This is possible for anyone who has ever purchased real estate and currently owns real estate. It’s just real estate. Banks/Lenders know how to get creative. It will take A LOT of work and discipline. But imagine gifting your child a paid off real estate asset at the age of 20!!!
I cant control the future, but I can control what I invest in daily. Will this work for my first born in 2033, I don’t know? Do I have a plan for my children's future, You bet I do.
Thanks again for your time and reading what’s in my brain. If you have any more questions on real estate investing, please don't hesitate to shoot me a message.
God Bless!