According to a 2017 study by the U.S. Department of Agriculture, “The cost of raising a child today [to age 17]is $233,610—excluding the cost of college—for a middle-income family.” As if that isn’t scary enough, this number doesn’t take into account inflation, so that adds a little extra salt to the wound.
As parents, we naturally want to give our kids the best we possibly can. We splurge on cute baby outfits, we buy ridiculous presents for their birthday, and we spend money on random activities or events for them. However, what is the price tag of a child’s happiness? Are you becoming broke just to pay for it?
Now don’t get me wrong: This article isn’t about how to raise your children, but how to afford the way you want to raise them.
Trust me, I get it. My kids are only three and one, and I want to give them the world—which is exactly why I am investing in real estate. Here are four ways I think real estate investments can help offset the staggering “cost” of having children.
4 Ways Real Estate Investments Can Help Fund Your Kids’ Upbringing
1. Start a college fund.
Arguably the biggest expense for your children is the cost of college. My husband and I are using the same method Brandon Turner describes in his article to pay for our kids’ college tuition.
We bought a duplex the year our son was born for $68,500. Even though we paid for the down payment ourselves, an investment of roughly $17,000, that duplex will appreciate to roughly $117,000 in 18 years (with the note being paid off in year 15). If we choose to sell it if he goes to college, it can be sold free and clear. We applied the same concept when buying a triplex for our daughter.
Other investors we know are flipping houses and putting most, if not all, of the profit in a savings account for college. Think of it this way—if you flip one house every year for 18 years and “only” make $10,000 each flip, that’s $180,000 you will have earned towards their college tuition! Combine that with a few rental properties, and you will have tuition paid for in no time.
What is the cost of college these days? That number will look very different based on the degree type, location (in state versus out of state), amount of time spent in school, public versus private university, etc. If you want your little one to go to your alma mater, go check out their current tuition rates online. For those who have no idea what type of post secondary education their child will pursue, the U.S. Department of Education’s has a pretty cool online calculator. After it scares you a little, it might help you budget and set an investment goal.
2. Pay for extra-curricular activities.
Right now, I’m enjoying our evenings free of running to extracurricular activities. Toddlers might be impulsive and destructive, but their social lives are basically nonexistent compared to their school-aged counterparts.
I see parents with school-aged children arranging after-school pick-ups, dinners, drop-offs, carpools (and more!) in an ever-changing scheduling nightmare. Whether your kids are in one activity or 10, those clubs probably all come with a price tag. Add more than one child into the mix, and I’m sure the costs per month really add up.
If your child’s after-school activities are costing you a few hundred bucks a month, a rental property could be a great way to cover, or at least help out with, these expenses. For example, if you own a duplex that cash flows $150 per door ($300 total) per month, and Junior’s traveling baseball league is $200 a month, then you can cover the cost of baseball while still saving some cash. You could also use the cash flow as a limiting factor to what activates your child can do—once the cash flow runs out, so do the activities!
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If you’re like me and your kids aren’t old enough to be involved in after-school clubs, you can apply this method to help offset child care/daycare costs!
On a personal note, I would recommend any cash flow be redirected immediately back into your business, but to each their own. I realize not everyone’s business model is to grow and scale their portfolio, and that’s OK! If you want use real estate to offset some family expenses, go for it. Check with an accountant and/or a lawyer on the best ways to transfer business funds into your personal account.
3. Offset family vacation costs.
If after-school activities aren’t your kid’s thing but traveling is, you might want to look at using real estate as a way to decrease costs on family trips. There many ways you can work vacationing into real estate investing, so I’ll just highlight a few:
- Buy a house at your favorite beach, rent it out most of the year, and stay there for free when you decide to take your family vacation. Owning a property at a popular vacation spot is one of the tried and true ways to take your family on an affordable (or virtually free!) family vacation year after year.
- Using rental property/flipping profits to take your family on an expensive getaway is another option. Again, I personally would reinvest this money back into the business, but if you want to splurge on travel, real estate can give you that option.
- If you own a rental property in a vacation destination, you can also potentially write off your trip.This can qualify as a business trip if you’re going to do any maintenance or general work for the property, so ask your accountant for all the details on this tip.
- If you don’t own a rental in any specific area but you are traveling there, you can still capitalize on a tax break. If you plan properly and work in some real estate related activities, you can write off a portion of the travel.
4. Teach lessons in blood, sweat, tears and responsibility.
If you are a parent who wants your child to have a job when they’re old enough to work, the perfect opportunity might be working in the family real estate business! I would say this tip would be geared towards high school-aged kids (or kids who can legally work—check your state’s legal working age). I would recommend smaller chores for younger kids might work just as well.
This could teach your son or daughter so many lessons that they won’t learn in the classroom. They will learn how to run a business, maintain properties, keep the books, and handle problems—all in a safe, low risk learning environment.
Do they want a car? Movie money? Twenty bucks for the mall? Make them earn itby doing tasks that are easily transferred off your plate. Here are a few examples of how they could help:
- Cut the grass at your rental properties.Landscaping is a cost for landlords, either in time or money. A win-win situation might be to hire your child to maintain the grounds at one or two of your properties. Empower him or her to set their schedule and choose the best days for them to do the yard work.
- Be the “turnover aide” for your Airbnb/VRBO rental. The main reason we have not gotten into the vacation rental space in real estate is the constant turnover! My husband and I both work full-time, so it’s not an option for us to leave to go flip a vacation rental between guests. Even though it’s not hard work, it takes time to run the vacuum, stock food, put away dishes, change the sheets, and tidy up. If you have a high school student who can drive, this might be the perfect help you’re looking for! After school is an ideal time for them to take 30 minutes to an hour to go get your vacation rental ready. It’s conveniently around the same time check-ins start. Your child will learn to be efficient and responsible because someone will be waiting on them!
- Perform data entry in your bookkeeping software. Are they interested in accounting or maybe IT? They see the income versus expenses, but they will learn the valuable lesson of reconciling books every month. This is a skill that is not often taught in schools (unless they take an accounting, finance, or economics course). This is applicable to the real world no matter the profession they end up choosing.
To Conclude: Kids are Expensive
I like to argue that the mentality our society sets that people “can’t afford” kids is crazy. Investing in real estate can provide you and your family opportunities that traditional saving and budgeting just can’t compete with. If you’re thinking investing in real estate is expensive, you may be right. It will cost you more in the long run if you don’t take action today. Stop worrying about affording your kids, and start enjoying life with them.
Would love to hear feedback from parents and kids