LEG UP INTO PROPERTY MARKET

DON’T DELAY: HOW PARENTS CAN HELP THEIR CHILDREN BE EARLY BIRDS

Teach them what buying property entails and to save for a deposit.

With house prices becoming increasingly unaffordable, the number of children turning to the Bank of Mom and Dad for assistance to get onto the property ladder has increased.

Here are some tips on how parents can assist, and what they must consider before handing over the cash.

1. There’s nothing as powerful as information

Learn about the property market: the different types of property investments, like listed property, unlisted property and immovable property. Then start preparing your children with money conversations at their level. This will help them determine what sort of property market they want to invest in. Teach them how to save for a property deposit and what it takes to finance property and maintain it. Go over budgeting, goal-setting and saving, as well as the basics about compound interest, risk and return and the assets you borrow for.

2. Investing in a property fund/portfolio for your children

The property fund, a form of a unit trust, is an alternative way to invest in property. Investors buy units in an investment property(ies) managed by a professional investment manager. This could provide your children with future cash flow.

3. Opening a long-term investment plan

This will help to invest monthly and save for the deposit and is suitable for parents whose children are still young. It should be done with the plan that when your child gets their first job, they already have a deposit for property and can proceed with the monthly housing loan repayments.

4. Provide your child with a deposit or total capital

If you’re providing your child with a lump sum, either a deposit amount or capital, be clear as to whether it’s a loan or a gift. If it’s a gift, parents must consider the tax implications. If it’s a loan, decide if interest is payable or not. Parents should obtain a legal contract stipulating all terms and conditions. They’d also need to specify such loans in their wills.

5. Buy a house together – joint home loan

Your child might be able to pay a bond, but not have enough credit history to be eligible for a home loan. Some banks accept joint home loan applications. The parent’s credit history will be beneficial at application stage. An understanding must exist to ensure the child doesn’t default on bond payments.

Happy Ngale is a financial planning consultant at Alexander Forbes

Picture: Shutterstock GO FOR THE SELL-OFFS ‘We believe that 2018 will bode well for [property] buyers as more and more [real estate investment trusts] sell off their noncore assets or assets which don’t fit into the fund’s long term plans and vision. Therein lies the opportunity for property investors to make calculated investments,’ says Norman Raad of Broll Auctions and Sales.