Teach chil­dren that prop­erty is a busi­ness as­set not a home

Yorkshire Post - Property - - PROPERTY - Vicki Wusche

THE age of first-time buy­ers is ris­ing and some may never be able to af­ford their own homes but Vicki Wusche, au­thor of Prop­erty for the Next Gen­er­a­tion be­lieves we can change this by teach­ing young peo­ple about prop­erty as an as­set and a busi­ness op­por­tu­nity. Here are Vicki’s tips: We learn our val­ues about money from our par­ents. “Money does not grow on trees” but what are you teach­ing your chil­dren? We need to teach them that there is good debt and bad debt.

Good debt puts money in your pocket. Bad debt costs you money.

Does your house put money in your pocket? No. It is a li­a­bil­ity and yet we are taught that own­ing your own home is an as­set. In fact, own­ing a prop­erty that is rented out to a ten­ant is an as­set, but when you live in it then you have to pay the bills.

Let your chil­dren know that they do not need to own the house they live in. In some cases it makes sense to rent a prop­erty for a tem­po­rary pe­riod.

Start to think of prop­erty as a busi­ness op­por­tu­nity as well as a place to live. Your chil­dren will face in­creas­ing house prices that come from nor­mal sup­ply and de­mand com­bined with the pres­sures of lim­ited space on our is­land. This will need new think­ing. What if they knew that prop­erty was a busi­ness op­por­tu­nity and they could buy prop­erty that they could af­ford, per­haps in an­other lo­ca­tion, rent it to ten­ants and then use the in­come to live a life of their choos­ing?

When you start to ex­plore prop­erty in­vest­ment as a busi­ness op­por­tu­nity you must un­der­stand “re­turn on in­vest­ment” as a way to com­pare one op­por­tu­nity with an­other.

Re­turn on in­vest­ment or ROI is an equa­tion that helps you un­der­stand what you will get back in re­turn for in­vest­ing in a par­tic­u­lar op­por­tu­nity.

Un­der­stand the im­pact of in­fla­tion and house prices on your fam­ily’s wealth. For ex­am­ple, if house prices are not in­creas­ing and in­fla­tion is be­tween two and four per cent then your home might ac­tu­ally be los­ing value in real terms. But if you in­vested in prop­erty and made 10 to 15 per cent re­turn then you’d be bor­row­ing money at five per cent to make 15 per cent.

Th­ese are just ex­am­ples, you must do your own maths.

Al­ways take re­spon­si­bil­ity for any in­vest­ment you make. Never just hand money over to some­one else. Al­ways be re­spon­si­ble for your own due dili­gence and check the facts for your­self.

Make all your de­ci­sions in a non-emo­tional man­ner and do not be pres­sured into sign­ing any deals or com­mit­ments.

Never sell a house – al­ways con­sider it part of your port­fo­lio. When you do have to move, maybe for work, al­ways ex­plore whether you can rent your prop­erty for a profit.

If you have cash re­sources or avail­able eq­uity start in­vest­ing now. Prop­erty prices are cheap in rel­a­tive terms. In­ter­est rates will in­crease but that is why you need to find prop­er­ties that will gen­er­ate over 10 per cent re­turn on in­vest­ment. Th­ese are, more of­ten than not, out­side Lon­don.

If you have chil­dren un­der 10 then they will not be el­i­gi­ble for a mort­gage in their own name for at least eight more years. By that time the re­ces­sion cy­cle will have moved on and with that prop­erty prices will start ris­ing. If you buy prop­erty now, with your chil­dren’s fu­ture in mind, you could ei­ther lever­age (re­mort­gage) or sell those prop­er­ties in eight to 10 years and use the profit from the cap­i­tal to pay for a de­posit on a house for them.

If you don’t have money to in­vest now, start sav­ing for the chil­dren and then buy smaller prop­er­ties as soon as you can af­ford them.

As soon as you ac­cu­mu­late £30,000-£40,000, or re­lease that level of eq­uity, then you can buy a ren­tal prop­erty. While you can’t buy it in your child’s name be­cause they are too young, you can buy it with them in mind.

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