GivEYoUrKids (or your Grandkids) AChANcE
We all have the same goals. We want to give our children the best and help them achieve the most that they can. But more and more today, it's hard to find the money to help them achieve their goals and to pay for college.
A recent study from the National Association of Realtors' shows that people who have owned their homes for 21 years will realize a 203% increase in value. So, Give Your Kids a Chance! Here's how:
• Buy a home for each child, a modest home for say: $50,000
o Today, we find that even though inventory is low, we are in a unique position to be able to buy a home at historically low prices at still, historically low rates.
o Buying as an investor may be a bit of a challenge. Now, investors are being asked to put 20% down, but on $50,000, that's only $10,000. And, yes, you can find a home for $50,000, or lower
o Rent the home for at least 15 years. After this time, you may experience a considerable increase in value!
• So: $50,000 purchase price, $10,000 down, you may be able to rent for $500/month. A good rule of thumb to establish is rent one percent of purchase price or one percent of value.
• Finance for 15 years at 5.5%
o Payment will be $326.84/mo, P&I with estimated taxes and insurance of $55 & $35 respectively for a total of $416.84
o Cash flow may be approximately $83/month, initially. In time, over the years, you may be able to increase rent.
• In 15 years, it will be paid for!
• possible appreciation may be $95,000 (190%)
• Sell the home with approximately 6% commission and 3% closing costs for a net of $86,450!
• You only put up $10,000! Your return on investment is approximately 11.6%! And don't forget, you will be able to write off some of your expenses on your taxes (be sure to consult a tax accountant.)
Even if the home does not appreciate one dime, someone else is paying the mortgage, month in and month out. In 15 years, you will own it, scot free.
Having income property will entail some work. You need to check out tenants, move them in, move them out, clean up in between, either fix up yourself or hire the work out. Any repair items will be tax deductible
As your child grows up, take them to their house. Teach them how to paint, cut lawn, do those things you can do. This helps keep costs down and will provide an invaluable learning experience. Even if you hire the work out, it would be good for them to sit in on the discussion/process, again as a learning process.
 New, foreclosed homes will be entering the market soon, giving you an even bigger selection.
 Investors must be able to qualify for the home they live in plus the home they are buying. Several years ago, banks would allow an investor to offset the cost of the loan with the rental income, but that is not the case anymore.
 You may want to rent and manage the home yourself or you may wish to hire a property manager. Typically, property managers charge 10% of the rent to screen tenants, collect rent, take care of repair issues, etc.
 You may wish to keep the home rather than sell it. After all, after 15 years it's paid for. It will continue to produce rent at the rate of at least $500/month; that's $6,000 per year! Sell it later, ask me about 1031 Exchange and how to avoid capital gains on your profit!