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A degree is still one of the best ways to secure high-paying careers and make the most of your potential in life.

Unfortunately, while parents want the best for their children, it all comes at a price. According to Statista, the average cost of college in the US in 2022 was $14,307 per year.

In short, you need to come up with a savings or investment plan today that will help your child afford the education they deserve. One option worth considering is to gain an understanding of the basics of stock market investment. It can be a volatile investment but can provide lucrative returns.

A less volatile option is to start investing in property. You and your child simply need to understand the basics, understanding that kids can’t invest in real estate since they can’t sign legal contracts. However, they can invest indirectly by working with you as the parent.

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Contents

Types of Property Investment

There are several possible types of property investment. These include purchasing a property to rent as either a long-term or vacation rental. You could choose to flip houses or invest in commercial property.

It’s worth looking at what FindBusinesses4Sale has to offer before you decide. They will help you understand costs and potential returns.

Commercial properties, such as offices, retail space, and factories generally offer five-year leases to tenants. That’s a virtual guarantee that your property will generate an income for the next five years.

Of course, you can also buy land and build on it. After completion, the buildings can be sold individually or you can be the landlord with multiple tenants.

Choosing what type of property investment appeals is a great first step.

Teenagers interested in property investment can explore several entry-level options that don’t necessarily require large capital but still provide exposure to the real estate market. Here are some property investment types suitable for teenagers:

Real Estate Investment Trusts (REITs)

REITs are companies that own, operate or finance income-producing real estate. Investing in REITs allows teenagers to invest in real estate through the stock market without directly owning property.

  • Benefits: Low initial investment, liquidity (easy to buy and sell) and dividend income
  • Risks: Market volatility and fees

Real Estate Crowdfunding Platforms

These platforms pool small investments from a group of investors to fund larger real estate projects. Teenagers can invest smaller amounts compared to buying property directly.

  • Benefits: Low initial investment, diversification of real estate portfolio
  • Risks: Less liquidity than REITs and higher risks depending on the platform and project
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House Hacking

House hacking involves purchasing a multi-unit property (like a duplex or triplex), living in one unit, and renting out the others. For teenagers, this may involve partnering with family members or saving for their first home purchase.

  • Benefits: Rental income to help pay the mortgage, learning about property management
  • Risks: Requires saving for a down payment and securing a mortgage

Rental Arbitrage

Your teen can lease a property and then sublease it on platforms like Airbnb, assuming local laws allow it. This requires little upfront investment besides rent and furniture costs.

  • Benefits: Earn rental income without owning property
  • Risks: Lease agreements may restrict subleasing and income can fluctuate based on demand

Real Estate Mutual Funds

These are mutual funds that invest primarily in real estate companies or REITs. Teenagers can invest in these funds through brokers or retirement accounts like a Roth IRA.

  • Benefits: Diversification, professional management and low initial investment.
  • Risks: Similar to REITs, mutual funds are subject to market risk.

Real Estate Wholesaling

Wholesaling involves finding properties below market value, putting them under contract and selling the contract to a buyer for a fee. It doesn’t require buying the property outright.

  • Benefits: Requires little or no capital, quick returns
  • Risks: Can be complex and requires knowledge of the market and negotiation skills

Peer-to-Peer (P2P) Real Estate Lending

Some platforms allow investors to lend money directly to real estate developers or buyers, earning interest on the loan.

  • Benefits: Regular income from interest payments
  • Risks: Risk of default by the borrower and low liquidity

Buy-and-Hold Rental Properties

Teenagers can start by saving for a rental property, which can be bought as a long-term investment. They can rent it out and generate passive income.

  • Benefits: Long-term wealth building, passive income
  • Risks: Requires capital for down payment, property management skills, and can be illiquid

Each option comes with its own level of risk, financial commitment, and knowledge requirement. For teenagers, starting with low-risk, easily accessible investments like REITs or real estate crowdfunding might be the most practical approach while learning the ropes of property investment.

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Options to Get You Started

For teenagers to be effective and excited about property investment, you’re going to need to get them involved early. Of course, you need to decide if you’re investing to cover their college costs or if this is an opportunity for them to start generating an income while at college.

It is possible to buy a home as a college student, but as you’re likely to be living in it, the income opportunity will be reduced.

Learn more: Why is College so Expensive in the United States?

Understand Financing

The first step is to understand finance. The type of finance you get will depend on the property investment you wish to purchase. For example, a buy-to-let property will require a mortgage from a traditional home lender; they’ll need to specialize in buy-to-let mortgages.

In contrast, choosing to purchase a retail space or office means you’ll need a commercial lender. Deposits on this type of purchase are generally higher.

A key factor in finance is that you can afford to repay it. For teenagers, this will mean demonstrating that the income from the property will be greater than the expenditure. In other words, as long as the property is occupied, you can afford to pay the rent.

Because teenagers, even those at college, will have low-paying part-time jobs, they may need a cosigner to help secure the necessary funds. You might want to step in to help with this process.

Consider All Locations

Unless you’re planning to purchase a property for your teen to live in at college, consider all available locations. The price of property can be significantly cheaper in some states.

While this also means that the rents collected or profit on flipping will be significantly lower, cheaper properties will be more affordable to teens just starting out in property investment.

If you choose to purchase property in another state, make sure you’re aware of all the rules and regulations and any additional tax implications.

The Difference Between Revenue and Profit

Teenagers need to understand that a property collecting $30,000 a year in rent isn’t giving them $30,000 a year to spend. It’s essential to understand all the costs that go into owning the property. That’s the finance, maintenance costs, taxes, and other charges. What’s left after paying everything is the profit which your teenager can use to help pay for college.

Of course, the big advantage is that your teen will already have an income when leaving college, this will help them find the right path in life.

Have a Trial Run

As a parent, you may still be unsure of how well your teen will handle property investment. Simply allow them to choose a hypothetical property. They should prepare the financials and you can monitor how the property does.

This will provide them with close to real-world experience and help them understand the pitfalls when investing in property.

That will better prepare them for when you commit real funds to a property.

Property investment, especially if started early, can be a great way to help your child fund college and give them a good start in life.

It’s possible, you simply need to take it one step at a time.

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FAQs

Can a 15-year-old invest money?

Yes, a 15-year-old can invest money, but since minors can’t open investment accounts on their own, they’ll need a custodial account. This type of account is set up by a parent or guardian who manages it until the child reaches the age of majority, typically 18 or 21, depending on the state. Minors can invest in assets like stocks, bonds, mutual funds, or even start saving for real estate investments through a custodial brokerage account.

What age is best to buy an investment property?

There isn’t a “best” age to buy an investment property, but the ideal time is when you have sufficient financial stability and market knowledge. Typically, people start in their 20s or 30s once they have saved enough for a down payment and built a solid credit history. However, with careful planning, some may be able to enter the real estate market earlier. Key factors include having a steady income, being able to manage debt, and understanding the responsibilities of property ownership. 

Can kids invest in real estate?

Technically, kids can’t directly invest in real estate since they can’t sign legal contracts. However, through custodial accounts or by partnering with parents/guardians, kids can invest in real estate indirectly. For example, they can participate in real estate investment trusts (REITs), crowdfunded real estate platforms, or save toward a future down payment with the help of a guardian. This allows them to start learning about real estate investments from an early age.

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