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How to build a better future for your kids through property investment.

How to build a better future for your kids through property investment.

October 12, 2021

Securing your children’s future is one of the most important things any parent can do. One of the best ways to do that is by investing and creating a nest egg for them. The purpose of the investment may vary – the profits could be for university fees, a deposit for their first home or anything else – but the method and overall goal remains the same.

Investing in order to achieve any of the above is by nature a long-term process, and that makes property the perfect option. High returns, impressive stability and a long-term outlook are what characterises this class of investment. By building a property portfolio you can give your children invaluable insurance against whatever may come in the future.

Here are just some of the things to consider when investing in property to build a better future for your children:

Have a solid, long-term plan

More than any other type of investment, having a long-term plan is vital if you are investing in order to secure your children’s future in years or decades to come. Many property investors get into the market with the intention of capturing short-term capital appreciation and then exiting again once they have received their income.

If you are trying to secure your children’s future through property investment, this tactic cannot be the only aspect of your strategy. Instead, we would urge you to focus on more than only capital appreciation – instead, make sure that you pay a lot of attention to rental yields as well.

Your rental yield is the passive, monthly income that you will receive from a tenant in your property. Unlike capital appreciation, rental income is a steady, long-term source of funds that will allow you to pay off any mortgages you have and build up a nest egg – the ideal solution for your investment goals.

At Opulent, we specialise in helping you develop multi-year investment strategies which are bespoke and suited to your specific needs. Find out more about how we can help you by getting in touch today >>

Look for a property market where the fundamentals are sound

If you are investing for the long term and want the best chance of stable, secure profits for many years to come, it pays to find the markets where the underlying fundamentals are in your favour and likely to remain that way far into the future.

This means that you should look for places where there is a huge imbalance between supply and demand – this creates competition and demand which will keep pushing house prices upwards, and at the very least will maintain them at high levels to protect their value. For this reason, buying UK investment property is a smart move for anyone who wants to build a portfolio and secure their children’s future.

The UK Government estimates that as many as 345,000 new homes are required in the UK every year on top of the existing housing stock as the bare minimum to meet demand. In reality, an average of just 240,000 homes are being built each year, which means that the gap between supply and demand continues to increase every 12 months. Furthermore, it is estimated that the pace of building is only increasing at 1% a year – ensuring that the present situation which is so favourable to investors has no end in sight.

It is this sort of consideration that should be at the forefront of your mind as it creates the conditions that your plan needs in order to succeed.

Gift the property to your children at the appropriate time

In order to not load your children with Inheritance Tax – which will normally be set at 40% of the value of the asset – you should involve them in the property investment process at an early time you deem to be right.

By gifting your property as a Gift Without Reservation, which means that you cannot benefit from the property after it is gifted, you can set up what is called a Potentially Exempt Transfer (PET). This means that if you survive for seven years after the gift, no Inheritance Tax is payable on the property at all, ensuring that you can pass the majority of the value of your asset onto your children.

There will be Capital Gains Tax and Stamp Duty concerns if you use this method, but overall it is a good way of passing on your assets to your children in a way that avoids a large tax bill. An independent financial advisor can offer advice that suits your particular circumstances, and we would advise seeking one out if you are unsure.

Investment is one of the best ways to provide a better future for your children, and UK property is perfectly suited to the kind of long-term plan that this goal requires. By investing in the UK property market, you can help your children through university, gift them a deposit for their first home and so much more.

For advice and information on a long-term property investment strategy, get in touch with our experts today who will be more than happy to help you plan >>

 

Author

Sanjit Dhanjal.

sanjit@opulentinvest.com