{"id":115947,"date":"2019-09-13T14:30:40","date_gmt":"2019-09-13T20:30:40","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=115947"},"modified":"2021-03-16T14:55:59","modified_gmt":"2021-03-16T20:55:59","slug":"teach-kids-real-estate-investing","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/teach-kids-real-estate-investing","title":{"rendered":"How to Teach Your Kids to Be Self-Made Millionaires"},"content":{"rendered":"<p>Recently on the <a href=\"https:\/\/www.biggerpockets.com\/podcast\" target=\"_blank\" rel=\"noopener noreferrer\">BiggerPockets Podcast<\/a>, I asked airline pilot and <a href=\"https:\/\/www.biggerpockets.com\/show343\" target=\"_blank\" rel=\"noopener noreferrer\">real estate investor Steve Rozenberg<\/a> to tell listeners a story about his son that I thought was just fantastic. It&#8217;s so good, I want to share it here, too.<\/p>\n<p><iframe loading=\"lazy\" src=\"https:\/\/www.youtube.com\/embed\/3aIPEVSd6Dc\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<h2>The Importance of Teaching Your Kids About Real Estate<\/h2>\n<p>Here&#8217;s what Steve had to say.<\/p>\n<blockquote><p>There\u2019s a great lesson that I learned from this that I really try to pass on to people now. It was never planned, I\u2019ll say that from the beginning.<\/p>\n<p>So, I have a 15-year-old son. When he was 14, he came to me one day and said, \u201cDad, I want to <a href=\"\/renewsblog\/2013\/01\/04\/how-to-rent-your-house\/\" target=\"_blank\" rel=\"noopener noreferrer\">buy a rental property<\/a>.\u201d<\/p>\n<p>It kind of took me by surprise. Now understand, I listen to a lot of radio shows and podcasts, and I\u2019m always listening anytime I\u2019m in the car. I\u2019m listening to an audiobook or podcast, so he\u2019s immersed in it without me even realizing he\u2019s getting it. You think your kid\u2019s just sitting there, staring out the window, but he\u2019s actually listening, too.<\/p>\n<p>So I said, \u201cOK, well you don\u2019t have any money. How are you going to buy your own rental property?\u201d<\/p>\n<p>And he said, \u201cWell, I do have some money.\u201d I asked him how much, and he said, \u201cI\u2019ve got $10,000.\u201d<\/p>\n<p>My first thought was like, <em>how did he get $10,000 without me even knowing?!<\/em><\/p>\n<p>But he said he\u2019s been saving and he has this money and that money, and so he can buy a rental.<\/p>\n<p>I told him that\u2019s not enough. You need more money. If you\u2019re going to buy conventionally a standard deal, you\u2019ll need more.<\/p>\n<p>He asked how much. I responded about $25,000. What he said back I thought was very interesting.<\/p>\n<p>He said, \u201cWell, how do I do it?\u201d<\/p>\n<p><em><strong>Related:\u00a0<\/strong><\/em><a href=\"https:\/\/www.biggerpockets.com\/real-estate-investing\" target=\"_blank\" rel=\"noopener noreferrer\"><em>Ultimate Beginners Guide to Real Estate Investing<\/em><\/a><\/p>\n<p>I told him he has two options: he can either save the rest of it or try to get some <a href=\"\/renewsblog\/creative-financing\/\" target=\"_blank\" rel=\"noopener noreferrer\">creative deals<\/a>\u2014maybe partner with someone. He said OK.<\/p>\n<p>So, he comes back to me a couple days later and said, \u201cIf I save the money, I\u2019m gonna be 28 by then, because it\u2019s taken me 14 years to get this.\u201d<\/p>\n<p>\u201cYeah, you\u2019re right,\u201d I said. \u201cSo, what\u2019s your other option?\u201d<\/p>\n<p>He brought up how I mentioned partnering with someone. He asked what that would mean.<\/p>\n<p>I said, \u201cWell, you and somebody else can put in the money, and you can be 50\/50 partners. Basically, you take on half the debt and he takes on half the debt, and you buy it together. Or you can do things where they run the property and you put up the cash, or vice versa. There are many ways to do it.\u201d<\/p>\n<p>He asked if I\u2019d go in half with him. I asked him what the terms were going to be.<\/p>\n<p>He looked through me like, <em>come on, Dad. <\/em><\/p>\n<p>But I told him this is business, and this is how you\u2019re going to learn. If you don\u2019t know the answers, this is how you get burned and this is how people take advantage of you.<\/p>\n<p>I said, \u201cSo, this is a lesson: Don\u2019t let me take advantage of you. Tell me the terms.\u201d<\/p>\n<p>He went and did some more homework.<\/p>\n<p>You know what\u2019s funny? About three months prior to that, he was asking me about real estate. I talked about appreciation and debt paydown and equity captured, and he asked me to explain it to him, which I did. I explained it to him and drew a map of the U.S. and what properties appreciate where and why people buy. And one day, I went into his room and it was up on his wall\u2014like he was looking at it and studying it. It was just always up there on the wall, and I never said anything.<\/p>\n<p>And then, a couple months later is when he asked me this question.<\/p>\n<p>So, he said, \u201cWell, how about if we did 50-50?\u201d<\/p>\n<p>I said OK and asked who&#8217;s going to manage the property. He said it could be my company. I asked him if that was a good deal. He didn\u2019t know.<\/p>\n<p>I said, \u201cFirst, you need to work this backwards. You have to explain to me: What is a good deal? What kind of property would make sense with all the expenses taken out of it, what kind of property makes a good deal? What is your exit strategy on this deal?\u201d<\/p>\n<p>No one ever talks about the exit strategy, which is one of the things that I\u2019ve learned. Even if you don\u2019t know what it is, you at least have to think about what it is. Is it a <a href=\"\/renewsblog\/2015\/09\/24\/1031-exchanges-real-estate\/\" target=\"_blank\" rel=\"noopener noreferrer\">1031<\/a>? What are you going to do with it?<\/p>\n<p>So, we went through the gymnastics of it. He got a couple sample deals, and I told him, \u201cWe\u2019re not going to go looking for a deal until you can tell me what is a good deal, because if you cannot identify a good deal or bad deal, there\u2019s no way anyone else is going to tell you whether or not it is. They\u2019re going to rip you off, so you have to know what a good deal is to you before you can go outside this realm.\u201d<\/p>\n<p>We went through the cash flow, <a href=\"https:\/\/www.biggerpockets.com\/blog\/cash-on-cash-return\" target=\"_blank\" rel=\"noopener noreferrer\">cash-on-cash return<\/a>, and I forgot what exactly the numbers were, but we both decided, OK, this is the deal we\u2019re looking for. So now, when this deal comes across our plate, we know it\u2019s a good deal and there\u2019s no question about it. It either fits our parameters or doesn\u2019t.<\/p>\n<p>I didn&#8217;t want him to have to learn make-readies or big rehab jobs. I wanted him to get a cookie cutter-type property. I had some buddies that were flipping and all that stuff, so I told them what I was looking for\u2014something pretty much done.<\/p>\n<p><strong><em>Related:<\/em><\/strong><em> <a href=\"https:\/\/www.biggerpockets.com\/blog\/sample-property-analysis\" target=\"_blank\" rel=\"noopener noreferrer\">Help Me Analyze This Real-Life Deal That Just Came Across My Desk!<\/a><\/em><\/p>\n<p>Knowing we were going to pay more for this, I told him, listen, it\u2019s done. You either pay now and do the rehab, or you just get it.<\/p>\n<p>This house, literally, we got the property, we closed on it. Four days later, we put a tenant in. It\u2019s been rented ever since. Never hear about it.<\/p>\n<p>My son gets the cash flow. My wife makes him put 40 percent back in to reinvest to buy another property, and he gets to keep 60 himself. So, now he\u2019s understanding.<\/p>\n<p>I told him, \u201cListen, Jet, if you had 10 of these, think of the cash flow coming in.\u201d<\/p>\n<p>He\u2019s like, \u201cYeah, I wouldn\u2019t have to work.\u201d<\/p>\n<p>I said, \u201cOr you could work and exponentially speed this up.\u201d<\/p>\n<p>He said that was a good point. His goal now is to own five before he gets out of high school.<\/p>\n<p>I\u2019m thinking, <em>man, I didn\u2019t own my first house until I was 30.<\/em><\/p>\n<p>So, I just think the one thing I\u2019ve learned is that we all work so hard to get wealthy, and we never want to see our kids suffer. But giving our kids a portfolio of properties is not actually helping, ya know? Teaching them the legacy of how to keep building that is key.<\/p>\n<p>I\u2019m realizing how many people out there are trying to be successful, but they never teach it to their kids. They\u2019re not building a legacy for their family, because giving them that money, it\u2019s like giving someone a good deal. They can lose it just as easy if they don\u2019t understand the fundamentals.<\/p>\n<p>I think it is very important to take this education that we\u2019re all working so hard grinding, trying to get better, and actually sit down with our kids\u2014or whoever\u2014and just showing them how they can carry on that legacy. I don\u2019t think many people do that, and I think it\u2019s something we should be doing. Otherwise, it\u2019s going to stop, right? It\u2019s not going to keep passing through generations if we don\u2019t keep doing that.<\/p>\n<p>They\u2019re going to say, \u201cMy dad made a lot of money. I got the inheritance, and I spent it.\u201d<\/p>\n<p>That\u2019s not really doing them any favors, in my opinion.<\/p><\/blockquote>\n<p>I told Steve that people often ask me if I\u2019m going to homeschool Rosie (my daughter) or send her to public school. I say, yeah, I am going to homeschool her. She might go to public school, too, but either way, school doesn\u2019t end at 3.<\/p>\n<p>She will know more about cash flow and <a href=\"\/renewsblog\/2016\/03\/28\/financial-freedom\/\" target=\"_blank\" rel=\"noopener noreferrer\">financial freedom<\/a> and wealth and all that when she\u2019s seven than most people know when they\u2019re 30.<\/p>\n<p>\u201cBy doing that, just think of what they\u2019re learning,\u201d Steve said. \u201cThey\u2019re learning a skill that I don\u2019t think they\u2019re going to learn in school.\u201d<\/p>\n<p>I agreed. No, they\u2019re not.<\/p>\n<p><a href=\"https:\/\/www.biggerpockets.com\/webinars\" target=\"_blank\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-91217\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/08\/blog_ads-01.jpg\" alt=\"\" width=\"700\" height=\"85\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/08\/blog_ads-01.jpg 700w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/08\/blog_ads-01-300x36.jpg 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\" \/><\/a><\/p>\n<p><em>Do you have kids (or plan to)? Have you spoken to them about investing (or do you intend to)?\u00a0<\/em><\/p>\n<p><strong>Let&#8217;s talk in the comment section below.\u00a0<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Airline pilot and real estate investor Steve Rozenberg shares the story of how his 14-year-old son taught him an important lesson in parenting: kids need to learn things from their parents that they aren&#8217;t taught in school\u2014namely, lessons about generating wealth and investing it wisely. <\/p>\n","protected":false},"author":710,"featured_media":115961,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5524],"tags":[],"class_list":["post-115947","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-investing-for-beginners"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/115947","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/710"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=115947"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/115947\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/115961"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=115947"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=115947"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=115947"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}