Using real estate to Help Your Kids

Investors already know that buying real estate is a solution to paying for a child’s education however, this may not be the right solution. In fact, it could be detrimental to a child’s performance, according to a paper published by University of California, “More is More or More is Less? Parent Financial Investments During College.” It suggests that there is a direct relationship between parents who pay the bills and lower academic performance by their children.
Rather than let your children party at school while you are stuck with the bills, why not get them to pay the bills. Tracy Ma from Financial Nirvana Mama outlines four key strategies for getting your kids to pay for their own education and at the same time, teach them real estate investing skills.
1. Teach them property management
If your properties are less than five years old (i.e. low maintenance) and your child goes to a school near your properties, why not have them manage the properties as their part-time job? Better yet, have them live in a unit as their principle place of residence and rent out the extra rooms to friends. Teach them how to manage the properties like a pro, with the right agreements, contracts, and templates. And don’t forget to teach them about all the applicable rental regulations. Now, they can use the cash
flow from the properties to help pay for their own tuition and books.
2. Teach them to profit from a real estate portfolio
If you have a couple of properties that you have held for more than ten years, you probably have a nice nest egg for your child’s education. Rather than selling the properties when your children are ready to go to post-secondary school, hold the properties a little bit longer until they graduate. Have them take out an interest-free student loan to pay for their education. Then, transfer the assets to your kids after they graduate from post-secondary education and have them sell it, or borrow against it, to pay for their loans. Any remaining profits from a sale, or available room in a home equity line-of-credit, can jumpstart your child’s purchase of their own real estate.
3. Have them manage a real estate portfolio
If the properties are held more than 15 years and your children decide to the leave the city, why not refinance the balance of the mortgage, and have them retain a team to manage these properties? Teach them to oversee the properties and monitor the expenses and payments. The cash flow can be used to offset their tuition fees and books. Once school is finished, they can liquidate, or borrow against, a property and pay off their loans.
4. Teach them hard money lending
If the properties no longer have any mortgages and your kids are off to medical school or they are too busy to manage real estate, teach them to sell the properties, contribute a portion to their tax free savings account, and lend out their money to other real estate investors as a mortgage-backed loan. Now your kids have mortgage payments coming into their bank accounts to help offset their living expenses and tuition costs. And after they have finished their education, they can recall the loans that they have issued to pay off their own student loan.
Be creative and financially savvy with these exit strategies to not only make your money work smarter, but teach your kids life skills. Using the strategies described, your kids will be on their way to paying off their education (and becoming real estate investors) in no time.

source: http://www.canadianrealestatemagazine.ca/expert-advice/item/2158-using-real-estate-to-get-rid-of-the-kids