According to 2013 statistics, the cost of raising a child in the US averages a cool $245,340. Though the outlay for nurturing a little human from birth to age 18 or so might run higher or lower, that’s still an impressive amount. But as Jason Hartman points out, parents and hopeful parents-to-be might get a boost from investing in rental property.
King Solomon stresses that connection between parents and what they can give to their children in Proverbs 1:8: “My son, hear the instruction of thy father, and forget not the law of thy mother.” And as the cost of bringing children to responsible adulthood continues to skyrocket, parents are looking for ways to pass not just wisdom and counsel, but also financial stability to their children.
Investing in income property benefits both generations. Parents might choose to invest in a property on behalf of each child – in most states investors can own up to four single family properties, or a combination of multiplex and single family homes totaling four, before qualifying as a commercial investor.
Investing in multiple properties also protects investing parents. Diversifying holdings over several markets as Jason Hartman recommends offers some protection in against a collapse that crushes all investments held in one market.
How Can Real Estate Cover Kids’ Expenses?
If you already own multiple rental properties, you might simply designate one for each child – and bank the income from that property into an account or trust for that child until age 18, you might transfer the property to the child’s name when he or she reaches adulthood.
If you don’t have children yet but expect to, consider planning your property investments with the future in mind. And if you have babies or small children, buying properties for them might be a way to create security for their future and a clear focus for your investing goals. A qualified real estate attorney or financial manager can help you find the option that’s right for you.
Investments Yield Income For The Long Term
Rental property can begin yielding an income as soon as it’s rented. Parents who purchase income-generating property for their children can use that income for a variety of needs – or save it for college.
Success in income property investing depends on using “other people’s money,” largely in the form of mortgages, to buy properties. Taking out an old-fashioned 30 year fixed rate mortgage in income property when frees your savings for, well, saving. Or emergencies. Or perhaps taking the family on the vacation of a lifetime.
Mortgage debt is the kind of “good debt” that yields long term returns and safeguards your assets. The tenants who rent your properties cover the monthly mortgage payments. And mortgage holders are also eligible for refinancing packages and other kinds of support in case an emergency strikes,
As Jason Hartman puts it, everybody needs a place to live. Rental property can continue generating an income as long as you – or your children – hold it. Unlike commodities like stocks or gold, the return on a piece of investment property comes from buying and holding it. Whatever strategy you choose to make your investments work for your children’s benefit, long term returns come from keeping the property n good shape and rented.
Tax Breaks For Owners
It’s been said that real estate is the most tax-favored asset in the US. Owners of income property can take advantage of a long list of deductions for each property they own. Deductions are allowed for repairs, maintenance and travel, as well as mortgage interest, depreciation and more. Under some circumstances, investors can also qualify for assistance if income is lost because a property stands vacant for a period of time.
Investors can also avail themselves of the deductions and benefits of entrepreneurship too. Your investing enterprise can qualify you for a variety of home business deductions too, including things like travel to and from your investment properties and the costs of advertising vacancies.
An Investing Education
However you set up and manage properties for your kids, investing offers opportunities for a lot of lessons about money. Depending on age, they can watch what’s happening with “their” property, track the finances, and participate in the decisions that keep the investment working smoothly.
Investing parents can introduce concepts such as borrowing, saving and budgeting through the day-to-day management of rental properties, as well as lessons in professional and personal relationships through dealing with tenants and their issues.
Buying – or maintaining – rental real estate for your children can work in several ways for you and them, with benefits ranging from ongoing income to college funding to freeing up savings for other needs. Rental property is always in demand – and it can build the wealth your family needs for the future. (Featured image: Flickr/dangrey)
Read more from Solomon Success:Real Estate Trumps Silver and Gold
The Solomon Success Team