It's time to Kick start your Kids

Many people like the idea of providing their children with some sort of financial start when they leave home or get married.

“Young people are finding it harder and harder to buy their first home as pressure on their earning power increases.” There just aren’t enough hours in the day for the average hourly rate.

Even with a massive decrease in the value of existing properties in Darwin, due to the failure for incomes to match inflation, many Millennials feel the chance of owning their own home is unattainable

“Many parents are planning for their children’s future by using the equity in their own home to purchase a rental property while their children are still pre or early teens.”

However many home owners are sitting on a significant financial resource and don’t realize it.

“A home owner’s equity, or more particularly their debt to equity ratio is a matter of perspective,” in my opinion. “For example take the case of a property valued at around $480,000 which was bought bought fifteen years ago for $105,000 or $115,000. By now most of the loan is paid off. Some people see it as say, $40,000 owing, whereas others see it as $400,000 borrowing or investment power - a potential nest egg which, correctly incubated will be ready to be hatched at a future date.”

In most areas in Australia at the moment, now, is a good time for home owners to invest in a residential property, as prices are still low but the market is near or on the turn.

“This means that the negative, low or negligible growth of the last few years has been absorbed by the previous owner and capital appreciation will be felt very quickly,” in my opinion.

“All the same, at whichever point in the property cycle you purchase, you can be certain of experiencing a capital gain in your money in seven to ten years, because statistics kept since late 1800’s show this sort of steady cyclical pattern.”

Home owners should talk to their accountant or financial planner as well as their real estate agent/s.

“Getting the right advice can save thousands of dollars and set you well on the road to giving your children that kick start,” I would conclude.

“You don’t even have to sell the rental property when you want to provide for your children - you can retain it as an investment for your retirement, merely using its equity borrowing power to help your children start their own property portfolio.”

"Another intelligent way of investing is having your children add to their superannuation from an early age. As little as a 3-5% personal investment per pay period could increase their retirement savings by over 400%- 1000%."

about the writer -

Sam Wilks has spent over 16 years in the Real estate industry, from sales, rentals, development and principal/director. Including Building and project development Sam has been in the industry for over 20 years. Sam Wilks is a property Owner and Investor and believes in the principal of "Education leads to financial freedom".

Sam Wilks is not a financial adviser and only provides financial experience and opinion.

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