Making Your Chicago Real Estate Investment a Family Tradition
One of the greatest investments you can make is property ownership. Today, now a decade after the mortgage bubble and tightened lending standards, real estate (and Chicago real estate, in particular), is still a solid investment for wealth-building. So, if you’re thinking in terms of a multi-generational wealth-building strategy, real estate investments are a perfect choice.
Multi-Generational Real Estate Assets
Whether it’s a property you wish to pass down later to the next generation or something that you want a family member to live in now, investing in real estate is something that can become a family tradition. As we see our younger generations encounter a few major obstacles in their quest to become property owners, never has there been a better time for the parents or older generations to make claim to these lucrative investments in their name.
Younger adults looking to own property are at a bit of a disadvantage in today’s economic climate, as they’re coming out of school with too much debt and too little income. Average student loans for the class of 2016 were around $37,172. And on top of that, changes in the job market paired with the lingering effects of the recession have meant that millennials are earning one-fifth less than their baby boomer parents were at the same age.
With economic factors like this at play for this generation, it means that young adults need their parents’ financial help with that first property purchase. While this might not sound like an ideal situation (for them, anyway), it actually is for the parents and those looking to buy investment properties because these properties can be immediately used and cared for by a family member who doubles as a tenant for a less risky investment, in terms of ROI.
Chicago Real Estate Investment: Basic Tips for Emerging Investors
So, if your kid is ready to find their own place to settle down, and you have been looking for a sound investment property in Chicago, it’s a win-win situation all around! There are just a few key details and discussions to keep in mind when choosing your family investment property. Let’s take a look:
Don’t Spend More Than You Can Afford to Lose.
The number one rule in investment properties and when giving money to family members is to never spend more than you can afford to lose. If your chosen property is entirely dependent on your family member being able to make the mortgage or rent for you to be able to afford it, then you must make certain that if for some reason things don’t work out that you will still remain in solid financial standing. You certainly don’t want to make your family real estate investment a risk by borrowing against the cost of your own home or worse. So, only take on the amount of risk that your family member can afford to lose. Don’t make it a burden.
Have a Plan for Mobility.
When making real estate investments a family tradition for your child, you always have to have an exit strategy. In today’s workforce, it’s all about mobility. So, what will you do if your child finds a new opportunity in a different city and needs to vacate the property? The whole family must be on the same page before you sign those papers. Will their movement matter? Will the property remain in the family? Will you rent it to someone outside of the family? If you decide to rent it out, who will assume the management costs? Will you sell it if they move out? All of these questions must be considered when making family investments. Fortunately, in any of these scenarios, you’ll still likely come out on top, as Chicago real estate and family-owned properties are in-demand.
Put Everything in Writing.
It’s never easy to discuss business with family, but to avoid confusion, we suggest that you write down every detail pertaining to your investment property and who will be responsible for what. Are you purchasing the property on your child’s behalf? Will it be a loan, or are you gifting them money for a down payment? Will the child have a path to ownership of the property? Will they pay rent or mortgage payments to you or another party? Make sure that you are protecting your own assets and your family member from getting in over their head. Remember, it should be a positive investment for all parties. So, you want them to participate, but you also want to control the outcome until they become the full owners.
It’s Their Home, Not Yours.
When it comes to family investment properties there’s one final hurdle that must be overcome, and it’s more psychological than financial. It would do everyone well to remember that the property is their home, not yours. When parents assume jurisdiction over their adult child’s home, there can be friction. So, before you make your investment, decide on precise boundaries, and stick to them. Providing financial support for an investment property is one thing, but you must remember that this is a place where they are building a home. They love and appreciate you, but they probably don’t want to see you just hanging out on their couch five days out of the week.
There are so many benefits to owning investment properties, especially if you’re thinking strategically about future generations. There’s no better place to invest than right here in Chicago. Contact a member of our team to get started today!