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Investing in property for your child's future

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Living in affluent Surrey we are amongst the richest people in the world. Our children, in many respects, are being bought up in the “Surrey Bubble” and there is nothing wrong in this, but are our children conversant with the costs that await them when they fly the nest.

Will your child ever own their own home?

Isn’t that what every parent hopes one day for their children? How realistic is this really unless you (that’s you the parent!!) take steps to help them now.

If we look at the housing market trends and the future predictions, and look at rising rents – unless your offspring get a chunk of inheritance or / and a top paid job, its likely your child won’t enter home ownership until their 40’s (if at all) unless they are given some help now, or educated to invest as soon as they can . Let me explain:

There are two ways ones offspring will get on the ladder earlier. a) inheritance or investment being handed down b) smart investments in property made early in adult life.

Lets face it, isn’t this how conversations already go?

Are you renting or do you own?” (The British class system is alive and well in the Surrey property market. We do like to ask these questions)

“I’m renting” (This tells you that someone hasn’t inherited yet, that their parents live modestly or haven’t downsized.)

“I’ve bought” (This can infer generous parents, an inheritance,or that they earn gold-bar salaries from a bank or some other finance-related business)

Do our children look at us and think that home ownership will inevitably happen? Would they be surprised to learn it probably wont?

It didn’t used to be like this! In 1945 only 26pc of the population owned their own homes. The rest of the population rented, and it wasn’t until the Seventies that the balance was tipped. Then of course we entered the days of Mrs Thatcher and home ownership soared.

What we now need to realise is that history has turned and we need to accept that for most people, renting is once again the only long term option for our children, unless Mums and Dads – you do something now to help them!

We now describe the under-35s as Generation Rent, but the reality is that renting is likely to spread from a generation into a whole era. It is thought that by 2022, another 1.2 million households will have moved into the private rented sector. Of these, 483,000 are likely to be 35-to-49-year-olds,

We know why this has happened. House prices, particularly in London and Surrey, are out of reach for many. Lenders have become cautious and deposits are too high for most people to stump up. Because rentals have risen, using up the lions share of take home pay, saving a deposit is becoming an unrealistic goal.

We need our children to be educated financially

We need to be suggesting to our children when they get their first jobs to save as much as they can towards a deposit on a small property, outside the area they may ideally wish to live. Start small. Ideally get a buy to let mortgage and rent it out. Across Europe where approximately 50% of tenants are Landlords and most of these tenants know they will be only able to afford their family home later in life. In Europe the young adults generally accept that they will have to rent a family home initially because its not an affordable option to buy this, but ideally they have one or two small units they rent out. Over a period of time, these mortgages are paid off from the rental leaving equity to sell and eventually go towards purchasing their own home. We should encourage this mind-set into our children.

With property prices starting a huge incline, now is the right time to look at investing. Why?

1) The demand for good quality rental accommodation is constantly high with no signs of this slowing down

2) Helping supply the market with property to rent will help the problems the housing market is facing

3) Any property that you do buy now is predicted to go up, meaning that if you took a good Buy To let mortgage now across say 10 – 15 years, the idea is the tenant pays the mortgage (via rental) and that you will get the capital return.

Property Investment NOW would really help our children get a foot on the ladder of the housing market in years to come….despite the government taxing Landlords by every conceivable way possible at the time of writing!

Short term pain, long term gain! No, its not as simple as having a trust fund, or a savings account, but if interest rates and house prices are as predicted – this could be the best way to help out the next generation.

Remember that buying to let and taking that journey to become a landlord is a business relationship. If you would like to chat about Buying to let, I would be delighted to hear from you. We can look through some of the properties you may be considering and discuss the pros and cons and rental yields. Just give me a call.