What’s your reason for investing in real estate? The answer seems quite straightforward – to make money. And why do you want to make money? Well, young, single real estate investors want to make money in order to become financially independent, to be able to afford more fun activities and a better lifestyle, and to buy a home and start a family. Real estate investors with families, on the other hand, want to make money in order to feed their spouse and children, to provide them with a home, to take them on family vacations, to educate their kids, to secure their finances after retirement, and to leave something for their children.
That’s all great, but regardless of how much you manage to leave for your kids from your real estate investment assets, eventually these are limited financial resources. Remember the old saying: “Give a man a fish, and you feed him for a day. Teach a man to fish, and you feed him for a lifetime.” It’s the same with real estate investing. You can leave your children a bunch of money or investment properties (which is great), or you can teach them how to make their own money by real estate investing. The latter is much more sustainable, right?
This means that you should start teaching your kids about the real estate business as early as possible, of course in an appropriate manner and with the appropriate terminology. It might sound crazy to engage young children with such materialistic as well as complicated matters as real estate investing, but you will be surprised how much children know about the value of money and how much more they are capable of absorbing.
So, let’s take a look at some practical tips on how to go about teaching your children about real estate investing:
1. Make real estate investing attractive
After all children are small adults, so just like you they will want to engage in activities which they find desirable for one reason or another. Chances are your kids have a piggy bank where they put any extra money which they manage to obtain from adult relatives in order to buy toys or sweets or anything else they like. Well, sit down with your children and explain to them in simple terms how they could make this money much more by buying (i.e. investing in) something (rental properties), and then they would be able to buy many more toys and lollipops (not that you should encourage the overconsumption of sugary items). I bet your little ones would LOVE this idea. And there you go, you have delivered your first real estate investing lesson to your kids.
2. Make real estate investing accessible
As a real estate investor, chances are you have some other full-time job. Let’s say you are a mechanical engineer. Remember this one time in college when you had to sit through a Medieval Arts lecture (for whatever reason), and although the paintings looked OK, you had no idea what was going on because of the crazy (unfamiliar) language that the lecturer was using? You had no fun, and you learnt nothing! Don’t make the same mistake with your children when you teach them about buying and managing an investment property. You have to make the language comprehensible and the ideas absorbable. Use simple terms such as “buy two houses”, “let people live in your houses”, and “collect money from them every month” instead of talking about “investing in multiple single-family properties”, “being a lardlord and dealing with tenants”, and “rental income”. As your kids grow older, you should expand their real estate vocabulary and introduce more complex concepts.
3. Make real estate investing engaging
We all know that real estate partnerships can be very profitable. Well, the most profitable partnership you could ever enter into is with your own little children. Make your kids your partners! It might sound crazy, but it’s quite simple. Once they understand that investing the money from their piggy bank could bring them more toys, they would love to try it out. Offer them to be your partners and to buy your next investment property together. Of course, their share will be tiny, but it will make the experience very real for them. Walk them through the process of selecting a range of income properties, visiting the potential investment properties together, going to the bank to discuss the mortgage options together, reading through tenant applications together, etc. Show that you care about the opinion of your little ones, and tell them when you think they are not making the best real estate investing decision and why this is so.
4. Make real estate investing profitable
Going back to the question at the top of this article: Remember that your children are into real estate investing in order to make more money from their piggy bank assets to be able to buy more toys and sweets. Well, that means that they will need some of the profits. Regardless of how negligible your kids’ cash share is, make sure to give them a fair (not proportionate) part of the rental income. Sparing $50 per month from your rental income for your children will not hurt your budget significantly, while this $50 will make your kids feel like they’ve achieved a lot. That’s a lot of money for a small kid. In this way, your kids will not only feel like a part of something big, but will also see in a very practical manner the benefits of buying and managing an income property.
5. Make real estate investing fun
Kids are kids, and they want to have fun (other than have more and more toys). Thus, you have to make the learning about real estate investing fun and exciting. Your children would definitely love to help around in managing your shared rental property, for example. Just let them do some of the wall painting, and see how much fun they will have. They will want to do more and more of it, and this pleasant feeling will grow with them into adulthood.
Related: How is real estate investing fun?
When did you start investing in real estate? Don’t you wish you started earlier? Don’t you wish you learnt about this great experience from your parents just as you learnt from them how to walk, to talk, and to eat with a spoon? Don’t make the same mistake with your children. Start teaching them about real estate investing from an early age. It will be totally worth it for them. Even if they don’t decide to go into the real estate business, there are plenty of skills which they will be able to apply in their other jobs, businesses, and investments.