Passing Down Wealth: 5 Ways to Get Your Kids and Grandkids Started in Real Estate Investing
For most parents and grandparents, ensuring the well-being and happiness of their kids and grandkids is a top priority. They're happily willing to sacrifice their time, resources, and finances to meet the needs and desires of their kids and grandkids in every way imaginable.
From fulfilling their basic needs and supporting their passions to creating the most fun and memorable moments, there's nothing quite like the unwavering dedication of a parent or grandparent.
While investing in those precious moments in the present holds immense importance, taking advantage of the opportunity to invest in and prepare your kids and grandkids for the future is equally important.
Whether you care to admit it or not, you're their most influential role model, which places you in the unique position to provide them with one of the greatest gifts—a financially secure future.
There are plenty of effective ways to invest in the financial future of your kids and grandkids, and it can be more than just about setting aside funds for them. Instilling financial literacy from a young age and introducing them to wealth-building strategies, such as real estate investing, are invaluable ways to begin shaping their financial future.
Real estate has stood the test of time and earned a solid reputation for creating long-term wealth and providing financial stability. What makes it truly remarkable is the potential for appreciation (especially for your young investors!) and the opportunity to generate consistent rental income.
That's precisely why giving your kids and grandkids an early start to real estate investing, even if it's just through knowledge and education, holds immeasurable value. Whether you're already a real estate investor or you're eager to learn alongside the younger generations, here are a few ways to introduce your kids and grandkids to this powerful wealth-building strategy:
Give Them a Real Estate and Investing Education
Invite Them to Real Estate Events
Ask Them to Join You in Joint Ventures
Introduce Them to Real Estate Investment Trusts (REITs)
Lead by Example
If you've showered your kids and grandkids with everything they could need and want in the present, it might be time to shift your focus to their future and give them a gift with a lasting impact. It's never too early to start, so let's get going!
1. Give Them a Real Estate and Investing Education
To get started, it's essential to lay the groundwork by helping your kids and grandkids establish a solid understanding of real estate and investing. You may need to adapt your approach to their age and learning style but don't let their young age stop you from teaching them.
Basics of Real Estate
When teaching your kids and grandkids the basics of real estate, start with simple concepts they can easily grasp. Start by explaining the idea of ownership and the various types of properties they may encounter, such as houses, apartments, or commercial buildings.
If your kids and grandkids are young, you can make use of pictures, videos, and even toys to aid their understanding and make it more tangible and related for them.
Discuss the concept of renting and explain why some people choose to rent instead of own. Highlight the pros and cons of ownership. Use familiar landmarks or their own neighborhood to illustrate the importance of location in real estate, focusing on factors like proximity to schools, parks, and amenities.
As you teach these concepts, encourage your kids and grandkids to ask questions and feel comfortable seeking clarification.
Basics of Investing
In addition to introducing your kids and grandkids to the world of real estate, it's important to begin teaching them the basic principles of investing, such as risk and return, diversification, and compound interest, as an initial step toward becoming real estate investors.
Fortunately, there are plenty of investment simulations and games available that can offer them a fun and risk-free learning experience.
While these simulations may not perfectly mirror the complexities of real-world investing or focus specifically on real estate, they still serve as valuable educational tools and provide an opportunity for your kids and grandkids to practice investment strategies.
One resource that can ignite the curiosity of young minds in learning about investing is The Stock Market Game. Created by a non-profit called the Securities Industry and Financial Markets Association (SIFMA) Foundation to promote an understanding of financial markets, this game has introduced over 20 million kids to investing.
By setting up a free account for them, your kids and grandkids will gain access to abundant learning materials and a virtual $100,000 to invest in the stock market. Introducing your kids and grandkids to investing in a fun and risk-free manner? It's a win-win!
When it comes to financial education for youth, there are countless creative and fun opportunities. By fostering a culture of learning, you're equipping them to become investors who can make confident decisions.
2. Invite Them to Real Estate Events
As your kids and grandkids learn about the basic concepts of real estate and investing, you can simultaneously begin to introduce them to the workings of the real estate industry.
Open Houses
Taking your kids and grandkids to open houses can be a practical way to enhance their understanding of real estate investing. It allows them to visualize the concepts they've learned and gain real-world exposure to the housing market. This practical exposure helps solidify their understanding of real estate investing principles.
Moreover, they can observe a variety of property types, layouts, and features, which can help them develop an eye for evaluating properties and identify potential opportunities or challenges.
As they attend more open houses, they gain insights into the local housing market, get familiar with available inventory, and observe pricing trends, all of which will prepare them to become confident real estate investors.
Networking Events
One example of a networking and learning event you can attend with your kids and grandkids is a local real estate investing seminar. This provides them with the chance to ask questions, seek clarification, and gain valuable insights.
It allows them to interact with industry professionals and fellow investors. These interactions help them grasp the various roles within the real estate industry and develop effective communication and networking skills as they continue learning.
While these events may be more suitable for older kids and grandkids, and you may need to attend them sparingly (unless they surprisingly enjoy such events), exposing them to the environment where you envision them thriving one day is important!
3. Ask Them to Join You in Joint Ventures
Your kids and grandkids cherish the moments spent with you and the memories you create together. So, why not incorporate a wealth-building activity like real estate investing into those precious moments? Seizing this opportunity allows you to create a lasting memory with a far-reaching impact.
Setting Financial Goals Together
Collaborate with your kids and grandkids to define financial goals directly tied to real estate investing. Even if there are numbers involved that are out of reach for them, it's still important to involve them in this stage of the journey. This can include setting goals such as:
Setting a target of saving for a 15% down payment on a rental property.
Breaking down the monthly savings required over 5 years to reach that goal.
Establishing a goal of generating a specific amount of rental income per month.
Naturally, your kids and grandkids may not be able to contribute much financially to these goals, if anything at all. However, instilling the habit of setting aside a small amount for this purpose will make them feel involved and like true partners in this venture. It fosters excitement as they eagerly anticipate the progress you are making together.
Investing Together
While your minor kids and grandkids may not have the legal capacity to own an investment property with you jointly, still present this as a collaborative effort and share with them how this investment will ultimately benefit them. That said, they can “invest” by using a Coverdell Self-Directed IRA you establish for them.
Whether it's the potential for them to one day inherit the property or the allocation of any rental income towards their future, involving them can be a meaningful experience for them. Some other ways you could involve them include:
Take them to property showings and encourage them to share their input and thoughts.
Allow them to participate in important conversations with real estate and financial professionals.
Have them sign (fake, of course! 😉) documents with you to create a sense of official involvement.
Involving them can reinforce the idea that this is a shared endeavor where their interests are valued, even if they don't have legal ownership at the moment.
4. Introduce Them to Real Estate Investment Trusts (REITs)
Buying an investment property is undoubtedly a huge undertaking. If you're not yet ready to dive into direct ownership, consider introducing your kids and grandkids to an alternative real estate investing strategy—Real Estate Investment Trusts (REITs).
A REIT is a company that owns, operates, and manages income-generating real estate properties. They pool investors' capital to create a diversified portfolio of properties, ranging from residential to commercial or industrial real estate.
REITs present the unique opportunity to participate as a real estate investor without the responsibilities of direct ownership while still enjoying some amazing benefits, such as:
Income Generation: REITs are required to distribute a significant portion of their income as dividends to shareholders, which can teach your kids and grandkids about the concept of passive income.
Liquidity: REITs are publicly traded on stock exchanges just like other stocks, providing liquidity and ease of buying and selling.
Accessibility: REITs allow investors to gain exposure to a diversified portfolio of real estate assets with a relatively small investment, making it more accessible if you don't have the financial means to own property directly.
Investing in REITs is a more accessible way to dip their (and maybe your) toes into real estate investing without the need for significant capital or the commitment of direct ownership. Even though you may be the legal investor in the REIT, you can still use this opportunity to reiterate the concept of ownership.
5. Lead by Example
Always stay mindful of the immense influence you have on your kids and grandkids. Your actions and behavior, from how you treat others to how you manage your finances, serve as powerful lessons, shaping the adults they will become.
If you have stories about your own real estate investing journey, tell them. Share with your kids and grandkids why and how you ventured into real estate investing. Share your successes, failures, and valuable lessons you've learned along the way.
If you're a self-directed investor and own real estate within a self-directed IRA (SD-IRA), this is your opportunity to share your expertise on outside-of-the-box wealth-building strategies. If you still need to check that box, we're happy to have that conversation with you.
If you're an aspiring real estate investor, share with them your motivations for wanting to invest in real estate and why they should consider it as well.
You impact your kids' and grandkids' financial narrative—will your contribution be a positive one that propels them towards success, or will it be a missed opportunity for their lifelong financial well-being?
Inviting Your Kids and Grandkids to Join the Conversation
When you set your financial goals and strive to achieve them, it's often driven by a desire to create a better future for the next generations, which is a truly admirable endeavor.
Whether you come from a bloodline where wealth has been passed down over generations, or you're on your way to breaking the cycle of poverty and altering the course for future generations, the mission remains unchanged:
Ensuring that your children and grandchildren have a better quality of life than your own and passing down not only the assets but also the wisdom needed for them to accomplish that.
At Chicago Trust Administration Services, we wholeheartedly understand and support your mission. Whether you're considering investing in your first, second, or third investment property, we're happy to discuss your options for expanding your real estate portfolio and provide the support you need in pursuing that endeavor. Moreover, we encourage the involvement of your kids and grandkids in these conversations and invite them to have a front-row seat.
To see how we can help you create a lasting legacy for your family, we invite you to schedule a complimentary meeting with us by calling 312-869-9394 or emailing steve@ctasira.com.
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*The content and opinions in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
**CTAS professionals are not financial advisors and cannot provide advice or recommendations regarding specific investment decisions.