Real estate stands out as my preferred avenue for average individuals to accumulate wealth. Additionally, the value of real estate experiences an even more pronounced uptick when one has children.
In the discourse between real estate and stocks for achieving affluence and lifelong contentment, I neglected to underscore a pivotal aspect. The valuation of real estate skyrockets upon the advent of parenthood. This appreciation intensifies in direct proportion to the number of offspring.
Upon reviewing over 200 discussions comparing stocks and real estate, a striking realization surfaced. Those who favor stocks typically lack children. The detractors of real estate ownership either don’t have children or their adult children have flown the nest.
This somewhat diminished perception of real estate as a wealth-building tool among childless individuals is quite logical. Let’s delve into the reasoning.
The Worth of Real Estate Pre-Children
Before embarking on parenthood, the central focus often revolves around enhancing one’s personal life. This self-interest is inherently positive. The significance attributed to real estate is relatively modest prior to having children.
Here are some attributes that hold particular value for individuals without children:
Wealth accumulation – The extensive educational journey is geared toward translating learning into substantial professional gains.
Career advancement – The objective is to locate a stable corporate haven for an extended duration.
Mobility – Openness to relocating in pursuit of opportunities takes precedence, resisting being tethered to a specific locale.
Flexibility – The single life entails dating, traveling, and perpetually exploring novel prospects.
Autonomy – The liberating sensation of independence is particularly cherished post-graduation or when children have moved out.
Given these attributes aspired to when childless, owning substantial real estate isn’t usually considered optimal. Real estate can feel like a hindrance when one is fueled by a desire for constant movement.
Hence, the preference leans discernibly toward stocks over real estate. Stocks offer uncomplicated portability, regardless of your whereabouts. The sole challenge lies in managing stock volatility.
My Perspective on Real Estate Before Parenthood
Until 2003, my investments were exclusively concentrated in stocks. This was partly due to my uncertainty regarding career prospects in New York City and San Francisco. Furthermore, I lacked the financial means to comfortably secure a down payment without parental assistance.
After two years in NYC, my firm didn’t extend a third-year analyst role. However, before my tenure concluded, I managed to secure a new Associate position at a competing firm in San Francisco.
Had I devised a strategy to leverage and invest in NYC real estate, I might have spurned the promising role in San Francisco. Perhaps managing the property remotely with a property manager could have worked. Yet, selling a property immediately after purchase isn’t ideal.
During my twenties, my primary focus centered on identifying a commendable company that would facilitate upward mobility. Although I esteemed real estate as a wealth-building instrument, securing a reputable firm role felt far more instrumental in amassing wealth.
The Urge to Acquire
Upon establishing myself at my new firm for a couple of years, a sense of belonging emerged. The specter of job loss faded as we rebounded from the 2000 dotcom downturn. Then, an extraordinary weekend in 2003 catalyzed my desire to remain in San Francisco for over a decade.
A heavy rainstorm on a January Friday implied snowfall in Lake Tahoe, three hours away. The subsequent day, my girlfriend and I embarked on a day trip to Sugar Bowl to enjoy the freshly fallen two-foot snow. It was an exhilarating experience.
The very next day in San Francisco greeted us with tennis in 74-degree weather. That pivotal moment cemented my conviction that the west coast indeed held unrivaled allure. Having spent a decade on the east coast prior, I had never encountered such idyllic moments.
In June 2003, I acquired my inaugural property – a 1,000 sqft, two-bedroom, two-bathroom condominium overlooking a park. The transition from stock gains to tangible real assets was gratifying. Prior to this, my girlfriend and I occupied a run-down one-bedroom apartment.
Once a satisfactory firm position and a beloved city are secured, the aspiration for real estate ownership becomes fervent. The ceaseless quest for something better diminishes significantly. A similar sentiment materializes upon finding a life partner.
Real Estate’s Significance After Parenthood
Upon embracing parenthood, one’s monetary and lifestyle outlook invariably evolves. The focal point pivots from personal advancement to providing for one’s offspring. Consequently, the significance attributed to real estate escalates significantly.
Post-parenthood, the willingness to clock 60+ work hours for promotions wanes. Weekend email response times contract. Preferring happy hours to family dinners becomes untenable. The cost of missing out on pivotal moments in children’s lives becomes too exorbitant, given their rapid growth.
Attributes prized post-parenthood include:
Stability and consistency – Children thrive within routines.
Community – A robust support network becomes invaluable. Picture having neighbors to collect packages or babysit.
Safety – Compromising safety for cost becomes inconceivable.
Education – Quality schools ascend in value, mirroring workplaces for adults.
Provider role – Parental aspirations center on optimal family care. Hence, owning a home that caters to their happiness takes precedence over stock ownership.
Parenting Equals Selflessness
The instant one becomes a parent, life’s focus shifts. Nearly all actions center on nurturing one’s children to ensure they blossom into well-adjusted adults long after one’s departure.
Nourishment follows a hierarchy – children’s needs take priority. Leisure time is second to their playtime. Television preferences give way to cartoons.
Naturally, some parents adapt better than others to this selflessness. Transitioning from a life of personal interests to parenting’s demands is challenging. Children can exacerbate marital strains. Caution is warranted.
Yet, embracing this selflessness for one’s children is profoundly rewarding, especially when children are young and appreciative. Acquiring a family property yields an overwhelming sense of achievement. The years of financial prudence for their sake prove worthwhile.
More Children, Greater Real Estate Value
The number of offspring directly correlates to a real estate’s worth, due to the additional utility it provides.
A five-bedroom house housing two occupants might seem excessive. Hence, empty nesters often downsize upon children’s departure.
However, the same five-bedroom house accommodating two adults and three children attains amplified significance. Ergo, its value surges.
Amid a pandemic, larger homes surged in value due to increased remote work. Demand arose for rooms per child and individual offices.
Furthermore, more children can empower parents to invest more in expansive homes. The price tag alone no longer dictates a property’s value. Instead, the price is divided by the number of inhabitants to gauge true value.
Real Estate in My Post-Children Life
The value of our cozy home surged when we brought our son home from the hospital. The roof shielded not only my spouse and me but also the precious newborn.
Remarkably, our housing expenditure remained static despite accommodating one more individual. Contrarily, adding a tenant could prompt increased rent charges.
The emotional surge upon our son’s arrival prompted me to retain the house, even if we moved later. I aimed for his lasting connection to his childhood home, unlike my nomadic upbringing.
Although our property became a rental after 2.5 years, the lower floor where his room was situated remains vacant. This space serves as an office and for extended guests. It also hosts father-son bonding in the hot tub.
Real estate became a haven for
my son and a source of passive income for us. Conversely, stocks generated dividend income and sporadic anxiety due to volatility. Ergo, real estate earns my heightened appreciation.
Real Estate as Business and Safeguard
Another compelling rationale for escalating real estate value with parenthood is its function as an insurance policy for children.
Should children encounter academic or vocational hurdles, managing a real estate portfolio can provide meaningful engagement.
Growing up within rental properties can foster a vested interest in portfolio management. Children can feel a stronger bond, given their lifelong connection.
The worth of an insurance policy preventing children’s aimlessness, depression, or financial struggles is inestimable. Perhaps even more than a million dollars per child, given the irreplaceable value of their contentment.
While awaiting children’s adulthood, rental properties can be channeled to build passive income. Acquiring properties pre-childhood can amplify their worth as children mature.
Real Estate: Parents’ Preferred Asset Class
In summary, the value of real estate escalates with parenthood because it:
Facilitates wealth growth and income generation to support children
Safeguards children until they depart for college
Supplies children with a potential post-graduation purpose
Offers shelter to adult children if needed
Augments children’s inheritance if real estate is bequeathed
I still hold an affinity for stocks, yet real estate provides immediate utility that outpaces stocks. Consequently, real estate accounts for about 40% of my net worth, while stocks make up just 25%.
Considering the enhanced value of real estate post-parenthood, real estate investors should monitor birth rates at local, regional, and national levels. Elevated birth rates correlate with heightened real estate demand.
Guidance for Real Estate Investment
Following the acquisition of one’s primary residence, neutrality regarding real estate prevails. The real estate cycle is navigated while accommodating the necessity of habitation. To hold a long position in real estate necessitates investing in additional properties.
For those seeking hands-off real estate investments, publicly traded REITs or real estate crowdfunding are options. After my son’s arrival in 2017, I divested a problematic rental property and invested $550,000 in real estate crowdfunding. My top choices are:
- Fundrise: Offering accredited and non-accredited investors exposure to real estate through private eFunds. Fundrise, established in 2012, consistently yields returns, independent of stock market conditions.
- CrowdStreet: Catering to accredited investors, it offers access to individual real estate opportunities, predominantly in 18-hour cities. These cities have lower valuations, higher rental yields, and growth potential due to demographic shifts and job expansion.
Both platforms are accessible for exploration and sign-up without charges. Personally, I’ve invested $810,000 in real estate crowdfunding, securing entirely passive income.
Readers, do you concur that real estate gains substantial value post-parenthood? Which other asset can rival the benefits offered to individuals? What surpasses real estate’s significance when one becomes a parent?