by Bella Scotton
Most people that invest in property
do so for a couple of reasons. They either want it for the near future to perhaps build on, or they may be thinking of it for a long term investment. Couples that have children usually always think about how they can make the future secure for their children, but often don’t consider that purchasing land while they are at a very young age could provide an excellent future for them.
Consider these benefits:
Raw Land Requires no Upkeep
A plain piece of property requires no upkeep to it. Whereas if you were to invest in property
that was already built on then you would have the upkeep costs of this over the years that your children were maturing.
Current Home Not an Option
It is true that you current home
could be kept as in investment for the children but there are a few drawbacks to this. Either they would not inherit the property unless you passed away. Or, you would move and give them this home. In either case chances are the current home may not be compatible with their needs and wants.
Having raw land that could be signed over to them when they become of age would really give them some options of either building on the land or selling it at the current market value.
Increase in Land Value Over Time
There are many different types of investments that could be made for the children. There is the stock market which can be volatile at any given time, or there are all kinds of savings accounts. What you really need to look at is what would the return on investment be for these? With stocks there are big risks, and with savings accounts they are solid but the interest gained is low, although it does accumulate over a period of years.
Compare these to the increase of properties over the last forty years….
One set of data shows that the cost of land
to build an average home on in 1975 was $4,489. The same land to buy
in 2015 was 97,148. A difference of $92,659. This is an average increase of $2,316. over forty years.
So if you were to purchase a piece of property at $92,000 now when your child was one year old, and held onto this until they were twenty for example, then you would have approx.. $40,000. In increased value
. But what also has to be taken into account here that there is only so much available property that is currently available, and in time there is not going to be as much available so this is going to be a big factor in driving up the price of what you purchase now and hold onto as a long term investment even more.
When buying this type of property
for your children you also want to consider some of the other options that may be available to you. Buying it for them to build a home
on is just one consideration. You want to know what other uses could be made of the land. For example, if it is land that has a lot of timber then perhaps an income could be gleaned from the land. Or if it is agricultural your children when they get older may want to work the land.
Check out the bi-laws for the uses of the land at the time you are buying
, and make sure that if there were to be any changes in the land in the future that these current uses would be grandfathered. Which means they would still be valid at the time your children took possession.
Know What The Laws And Choices Are
When you are buying property for the intent of your children as an investment for them you need to check out the current laws for the best way to hold title of the property. You should check with a lawyer to see what the laws are pertaining to putting the property in trust for the children. You also need to know
what the IRS laws are pertaining to this, so you can keep transfer of ownership costs down when the time comes. Here's a great guide on how to buy land: https://fitsmallbusiness.com/how-to-buy-land/
Like this article? Please feel free to share or post a link on your site: https://www.landhub.com/blog/buying-land-investment-childrens-future/