3 property investing mistakes to avoid as a parent
By Josh Masters, buyer’s agent and director, Buyside Property
What if your kids can’t get into the property market?
What if they can never afford to buy on their own?
What if they have to rent for their whole lives?
Having recently interviewed a number of our top clients to really understand what was driving them to invest in property, we’ve discovered that many people are clearly worried about their children. Their fear is that the next generation may never be able to get a foothold in property.
Having had my first child only last year, I know how it feels to want to provide for the family. You don’t want to hand them their life on a silver platter, only for them to fail to appreciate it, but you also want to provide them with the resources to create a great life for themselves.
While parents want to help their children, that doesn’t always mean a handout. Some are happy to gift their children an investment when they come of age while others seem more inclined to pass on enough equity to provide them with the deposit needed on a home and have the children make the repayments.
Either way, for those parents who are considering investing in the market with their kids in mind, here are 5 of the top mistakes that you should try and avoid when investing for their offspring:
- Not focusing on quality
Price is often a driving factor in purchase decisions, but you risk turning your children off investing for life if you give them a property that is more trouble than it’s worth. If you have the tenant from hell or a property in such a state that you could push it over in a light wind, they will only be discouraged about real estate. Every area has its good and bad pockets, regardless of price; ensure you stick to the good pockets if you want to encourage them to invest again.
- Failing to factor in affordability
While you may want to buy in areas you know because, well, you know them, they may not be affordable for your kids to own when you pass the property on. You don’t want to force your kids to work their day job and night shifts at the local restaurant, just to make their mortgage repayments. Keep the purchase price at a level where, when you hand over the reins on the mortgage, it will be financially possible to do so.
- Not looking at the long-term
If you play your cards right then the property you buy for your kids may be with them for decades – so you need to take a long-term view on the purchase. Invest in an area that has a solid, long-term growth rate; while it may cost them a small amount per month to maintain, they’ll get that back in spades when the property rises in value. This will make it so much easier for them when it comes to stumping up a deposit on the next property – it’s the perfect leg-up that kids need to get into the market successfully.
As a parent, it’s natural to make some sacrifices for your children, in order to give them a better life, but sometimes it more beneficial for them to measure the actions of the heart with the head. Think long-term and be realistic about your expectations and the responsibilities you’re hoping to pass on to them, and you may set them up with some great life lessons in years to come.