Guest Blogger Jim Woods: Get Your Kids Interested in Real Estate
Jim Woods is the former head of the Entrepreneurial Studies program at Cincinnati State University, and teaches a 2-day class for 15-22 year olds called the “Youth Entrepreneurial Academy” each year at the National Real Estate Strategies Summit (this year, November 3-6 in Cincinnati.)
How to Get Your Young People Involved in Real Estate
By Jim Wood
Begin by teaching them about the lifestyle choice that they’ll get to make each day of their lives… the lifestyle choice of being either rich, poor or middle class. Once they make that decision, show them how they can use real estate as a vehicle for reaching their chosen destiny.
Let’s face it… for almost everyone first starting out, investing in real estate is just another job… part-time, but a job that takes additional time away from family and friends. Rare is the first-time real estate investor who has the available funds to jump into rehabbing or buying rental units without another “job” to support them. Most of us get started as real estate entrepreneurs by doing real estate “on-the-side” in the evenings and on weekends while keeping our day jobs to meet our families’ financial needs. Thus, the goal for most newbie investors is to earn additional money for the family while not losing that valuable family time.
My wife and I got into the real estate business quite accidently. Out of necessity we would buy junker houses to live in because that was all we could afford. Then we would fix them up while we lived in them. As the family grew we would buy another house with more bedrooms and baths and fix that one up. All this was being done as our children were young.
I got started as a real estate entrepreneur when a friend of mine who was in the business of rehabbing houses talked me into buying a house at an auction to rehab. My wife and I bought that first investment house and went about renovating it ourselves. Very quickly I was declared by the family to be an “absentee father”… my wife and kids missed me and I missed them. So to solve this issue, we turned the rehabbing into a family job on evenings and weekends. Beginning in the third grade our kids had “age-appropriate” construction helper duties that they performed. Yes, they were well paid at the time. I believe they were earning about $4,460 a year and as wage earners they were funding their own Roth IRA’s. We did everything we could to make it a fun time for the kids. At the time we rarely “ate out” so on rehabbing days they got to choose whether we would eat at Rally’s or McDonalds… a big deal for a 3rd grader and a 7th grader. As an additional reward to them for their help, whenever we sold a house the kids had major input on where we would use some of the profits to go on vacations. We wanted them to see the connection between participating in real estate and the financial rewards that occurred when we sold a property. We also shared the financial numbers on each deal so they got an eyes-wide-open idea of just how much money we were making.
In my opinion, every parent should teach their children early and often in their lives about where money comes from… from working hard to delight a customer and from working smart to get a job done better, cheaper, and faster. The “financial awareness system” we used to impart this value was the system by which our children got money from mom and dad to buy things they needed and things they wanted. For example they “needed” gym shoes for PE class at school… they “wanted” a pair of celebrity-endorsed “cool” gym shoes with a $150 price tag. So, mom and dad would pay $65.00 for a perfectly good pair of gym shoes but if the peer pressure and/or cool factor was something they just couldn’t pass up then they paid the difference between the $150.00 and the $65.00 that we kicked in. Want to go to Space Camp? Then mom and dad would pay half and the future astronaut would earn the money for their half. Since they were too young to have jobs outside the home, we provided lots of opportunities to earn money by doing chores around the house. Need money for something? Then go the refrigerator door and look at the Chore List. Wash the car for $2.00, vacuum the car for $2.00, wax the car for $10.00, clean and sweep the garage for $3.00. And beginning at age 14 ½ you could read a book from The Wood Kid’s Reading List and share your learning from the book with mom and dad for $100.00. You get the idea.
To get young people involved in real estate you’ve got to understand where they are in their life. Here’s what I’ve learned about young people as a college professor over many years.
- Most have very little money.
- Most have very little self-confidence because they have very little life experience.
- Most waste a lot of time on Facebook, TV watching, and playing video games.
- Most are looking for the “love of their life” and spending every minute possible with that person, beginning at puberty.
- Most have way too much debt from college loans for college majors that don’t lead to employment, or credit card debt from what they now realize were wasteful purchases.
- Most lack a social support group that is interested in real estate in general or in one day becoming wealthy.
Strategies to get the young people in your life involved in real estate.
- If they are going to go to College, consider having them start at a Community College for the first two years, then transfer to a university to complete their degree. Save the difference in tuition, housing costs and fees so they have a nest egg to purchase their first investment properties.
- If they are determined to go to a university from the start, consider buying a house near campus. Have your child serve as the property manager. Let your tenants pay down the mortgage and give your child part of the profit so they can buy a rental property in the area where they choose to live.
- Pay for their first three years of college. Then have them pay for their last year from money they earned working in your real estate business. One well executed rehab job and college should be paid for.
- Have them work for the family real estate business by calling FSBO’s, writing letters, putting up signs, listing on Craig’s List and other online sites. Their pay for this work should be more than minimum wage or what they would earn in a mall store.
- Teach them how to negotiate to get the best price on everything. It should become a game to never pay retail price or the asking price. Buy low and sell high.
- Teach them how to identify and solve problems… people problems, as well as house problems.
- Get them to use their technological expertise with computers, tablets and smartphones to find potential deals and to sell or rent properties.
- Practice open book management so they can learn as much as possible about the “Great Game of Business.”