Here’s my advice to anyone starting out in real estate with children.
Instead of saving for their college education BUY THEM A HOUSE…NOW!
Here’s the theory…
You have children… You want the best for them so you save for their college education. Now in the real world not every one of our kids will become Doctors, Lawyers, or Engineers. And in the real world, if you look at the cost of a college education most people can’t save enough to keep pace with the 15% annual increase in that cost. So you do the best you can… And maybe, you can come up with half to three quarters for them. They take that and do what most kids do. Goof off for a year, party, and graduate with a useless degree in political science, history, (fill in your favorite here) End result… Their working as a manager at a (fill in your favorite here) And have $50,000 worth of student loans.
Now they want to buy their first house, but they’re $50k behind the 8 ball and where I live a starter home is a quarter of a million dollars. There is no way that kid is going to swing that payment. If he can he just did what most of our parents did. Bought THE ONE AND ONLY home they ever will buy because they can’t save enough to move up once they start having kids.
Now the alternative…
Instead of Mom & Dad busting their *ss to save for juniors college they purchase a single family home. These people are smart, they wait for a market like we’re entering now SLOW AND DECLINING. They look and look and get a great deal on a house someone HAS TO SELL. Let’s use my numbers… The 3 bed House is worth $250,000, if it was in good shape, but it’s ugly, needs updating, a roof, ect. The owners want out they offer $125,000 cash, AS IS, no inspections, They take it!
Mom & Dad take $10,000 they have saved for junior’s college so far and put it down on the home. By the way “junior” is 3 years old at this time.
Repairs cost $25,000 so their in for $150k. It rents for $1800/ month. They aren’t making a lot of money every month but that’s not why they did it. 15 years later the house is paid off, Junior is 18 and now this house is worth at least the original $250,000 probably more like $400,000.
For $10,000 plus the B.S. involved in renting, Mom & Dad have set this kid up better than they could have ever imagined.
I know this works because I’m 5 years away from having my son’s “COLLEGE” house paid off. I bought it during the last bust and have exactly $10,000 of MY MONEY into it. It is now worth $325,000
Just a thought outside the box.