Why Buying Your Gen Z Kid a Home Is a Good Idea Financially
Sometimes it seems like boomers were the last generation to really achieve affordable housing. With the housing market stagnating at higher prices but lower inventory, and wages not keeping up with inflation, Gen Z and their parents may be wondering how they’ll ever own a home.
One trend is for the parents of Gen Z to purchase homes for their kids — not to spoil their children with a pricey purchase, but to buy into an asset whose value will only appreciate, and help Gen Z get a leg up in the future.
Real estate experts explain all the reasons why buying your Gen Z kid a home is a good idea.
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Long-Term Appreciation
Real estate typically appreciates over time, providing a valuable asset for your Gen Z child in the future, according to Colten Claus, an associate broker with 8z Real Estate in Colorado Springs, Colorado.
“Historically, real estate has proven to be a stable investment with the potential for steady growth in value, offering a tangible asset that can serve as a financial cornerstone,” he said.
Educational Housing Costs
Purchasing a home for a college-going child can also do double duty by eliminating the need for paying rent or dorm fees, Claus said, potentially saving thousands of dollars over the course of their education.
“The property can be used as a primary residence for the child while attending college, reducing living expenses and providing a more stable living environment,” he said.
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Rental Income
Additionally, if the property has extra rooms or units, they can be rented out to other students or tenants, generating rental income.
Not only can this help cover the mortgage, property taxes and maintenance costs, and potentially provide additional income, but, he added, “rental income can also teach the child about property management and real estate investment firsthand.”
Tax Advantages
Homeownership also offers various tax benefits, such as deductions for mortgage interest, property taxes and possibly depreciation, Claus said, which parents can benefit from until their child is ready to take it on.
“These tax write-offs can significantly reduce the overall cost of owning the property and enhance the investment’s attractiveness.”
Building Credit History
If the property is purchased in the child’s name or if they are involved in managing the mortgage payments, this can also help build their credit history from a young age.
“A strong credit history will be beneficial for future financial endeavors, such as securing loans for business or personal use,” Claus said.
Forced Savings
Another way to think of homeownership is as a form of forced savings for Gen Z children, according to Annie Dickerson, a real estate investing expert, founder and chief brand officer of Goodegg Investments, a boutique real estate investment firm.
“Instead of spending money on rent, they channel their resources into building equity in a property,” Dickerson said. “This disciplined approach to saving encourages financial discipline and wealth accumulation over time.”
Equity Building
Of course, so long as you’re making timely mortgage payments on the property, you’re building equity, which can later be leveraged for other investments or financial needs, as well.
“This equity can serve as a financial springboard for the child’s future, providing options for refinancing, obtaining home equity lines of credit or purchasing additional properties,” Claus explained.
Instill Responsibility
Dickerson added that investing in a house for your Gen Z children provides them with a tangible asset that they can call their own, which has benefits beyond the financial.
“This early ownership instills a sense of responsibility and pride, fostering a strong foundation for financial stewardship and independence.”
Learn Investment Skills
Managing a real estate investment can also provide invaluable lessons in finance, property management, and investment strategies, Claus pointed out.
“For a Gen Z individual, this early exposure to real estate investment can foster financial literacy and entrepreneurial skills,” he said.
Hedge Against Rising Housing Costs
By investing in a house early on, Gen Z children can hedge against rising housing costs in the future, Dickerson said.
“As property values and rental rates increase over time, they benefit from the stability and security of locked-in housing expenses, providing a buffer against inflation and market fluctuations,” she said.
Flexible Living Arrangements
Such a property can also be utilized for flexible living arrangements to accommodate changing needs and circumstances, Dickerson explained.
“For example, it can serve as a primary residence, a rental property to generate additional income or a multigenerational home to support extended family members. This flexibility ensures that the investment remains relevant and adaptable to evolving lifestyle preferences.”
Wealth Transfer and Legacy Building
If you’ve ever wondered or worried about what kind of legacy you can leave your children, investing in a house allows parents to transfer wealth to their children in a tax-efficient manner, Dickerson said.
“By gifting or bequeathing the property, they can pass on a valuable asset that appreciates in value over time, creating a lasting legacy for future generations.”
Community Stability
Lastly, Dickerson pointed out that homeownership fosters a sense of stability and belonging within the community for Gen Z children.
“It provides a permanent anchor in a neighborhood, encouraging deeper connections with neighbors, local schools and community organizations. This sense of belonging enhances overall well-being and quality of life.”
By embracing homeownership early on, parents can lay the groundwork for Gen Z children’s long-term financial success and security.
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This article originally appeared on GOBankingRates.com: Why Buying Your Gen Z Kid a Home Is a Good Idea Financially
