Is it possible to invest in Real Estate under age 18?

Question

Hey BP community. I am 17 years old and have been wanting to get into real estate for about a year now. I have been constantly reading books and listening to all kinds of podcasts about REI. I know i can't sign any legal documents until I am 18 years of age however I was wondering if I could have a parent sign all the documents under their name and buy the property under their name? Could I claim it as my own but won't actually own it until I am 18?

This has been something I’ve been thinking about for the past few weeks. I am currently a senior in high school and thought the extra cash flow from a rental property would really help me out once I get to college. Is this choice ethical and legal?

Nathan Gesner · Answer

Your parents can sign all the documents and you could be named as the owner on the deed.

Nathan Gesner · Answer

If the home is 100% owned and you place it in the child's name, I suppose that would be considered a gift. However, I was talking about a traditional investment where you put the minimum down and let renter's pay down the loan. In that case, the only "gift" you've given is the down-payment.

I'm not a CPA but I believe the gift tax exemption is $15,000 for 2019. If you put $30,000 down then you could be taxed on $15,000 of that, which is pretty minor. Even better? Purchase a home with $30,000 down but give them $15,000 in December 2020 and $15,000 in January so you don't exceed the annual gift contribution.

If you're going to do it, I'm sure there are plenty of ways to skin that cat without Uncle Sam stealing the hide.

Nathan Gesner · Answer

Why would you? For the original poster, it makes sense because he is paying for it and taking responsibility for it immediately; he's just not old enough to sign the documents or be on the mortgage. Once he's of age, he could take over.

For a newborn, it wouldn't make sense. What if the daughter turns into a complete bum? What if she runs off and marries a 72-year-old she met at the strip club? I won't give anything to my kids until I know who they are as people.

Stanford Walker · Answer

@Nathan G.

Thank you for letting me know this. I really appreciate it, now it’s time for me to start to find amazing deals and present it to my parent!

Will Barnard · Answer

Excellent answer. There you have it.

Ian Boyd · Answer

Well if I own the property then want to give it to them you will likely pay taxes on the transaction because its to big to be a gift. If at the time of purchase it goes into their name then they will own it as their own. I plan on gifting each of my children an investment property, putting it on an 18 year loan to pay off when they graduate high school. I will not tell them they have a property. When they graduate I will explain it to them. They can sell it and blow the money, go to college or take the income from it to pay for college or life. If they want to waste it all that is up to them. I will tell them to never ask me for money in the future, especially if they waste the money. Obviously I will try to teach them how to manage money/assets but you can only lead a horse to water.

Ian Boyd · Answer

What if you are buying a property for your newly born child? Would you just record the deed in their name and when they are old enough they can take the reigns of the investment property? If, for whatever reason, the property gets foreclosed on is the child going to have repercussions?

Is it possible to invest in Real Estate under age 18?

Is it possible to invest in Real Estate under age 18?

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