Are you considering buying a home for a child or family member? Well, you are in the right place and I am here to help you!
There are actually plenty of great reasons for parents to buy a house for their children. I recently have been working with a couple of families, in particular, parents who are purchasing a home for their children. These parents either want their children to get a better jump start on life or allow them to purchase a home for a cheaper payment compared to a rental. This has become more common for parents in the recent years as it can be financially beneficial to both sides—the parents and the children.
There are three main things that you should really take in consideration when you are looking at doing this and when you are seeing it if it is a good option for you.
1. A stable place to live
One main thing you have to consider is how stable it is. When you are looking for a rental, oftentimes, they are not a long-term option. They are either month-to-month or a lease that's perhaps only a year or two long. With that said, you also may have your landlords coming in for visits, inspecting the unit, and other things like these that just make it a little bit tougher to remain there long term.
2. Rents increasing, payments are not
The other main thing to consider is going to be the increase in rental rates in the next few year. Here in the Sacramento area, the rent increase has been substantial. Every year it has been increasing and I'm constantly talking with people about their increasing rent payments. That's one thing that we are not seeing going away anytime soon and will cause you limitations as a homeowner in the future. With a mortgage payment, they typically offer a fixed rate so that the payments do not increase in the future.
3. Benefits of appreciating in value
The last main thing to consider when you are looking at this option is the appreciation, it is the increase in the value of your home over a period of time. For the last several years, we have seen the values of home consistently increasing and with that being said it's made it a lot better for the parents that have helped purchase a home to be able to get some of those funds back. It has also helped a lot of adult kids be able to have more equity in the home and have more options in their future, while some parents have been able to do a cash out refinance and get those initial funds back.
Buying a house for your children is also one effective way to teach them a lesson in financial responsibility. Aside from that, it has a financial advantage for parents. For example, parents might be able to take some significant tax deductions for this purchase.
These are just a few of the reasons on what you should consider before buying your child a home if they are currently renting. Once you have decided, be sure to talk to a professional, like your Realtor, to guide you through the process and help you make the right choices. If this is something that you are considering, please do let me know. I'd be happy to see what we can do on both sides for you.