House Hacking: Paying For Your Children 'Til They're Out Of The House

 Today we're going to explore three different investment scenarios on a $200,000 property with 5% down and an interest rate of 6.5% (conservative to where rates are at the time of recording) - over a period of 10, 20, and 30 years.

As of January 1 2023, there have been a ton of reports out there on the cost of having children until they are out of the house - the studies are from birth to age 18.

The studies found during the first 18 years, the average cost per child for a middle-income family was around $290,000 (give or take depending on the source)

Here is the scoop on how house hacking can help mitigate some, most, or even all of those expenses during those 18 years using our 5 house hack properties weve been using in our examples for the past week or so.

Reminder on the numbers for these 5 properties. Each year, we purchased a $200,000 property with 5% down with an interest rate of 6.5% over 30 years.

To keep these videos and examples from being repetitive and long, I'm just going to jump into the examples, if you'd like to know how we got to these numbers and calculations be sure to go check out my previous videos to get the full scoop.

Scenario 1: 10-Year Investment

After 10 years, our equity in each of the 5 properties came out to roughly $92,000 - meaning if you sold, before fees, you have $92,000.

And we house hacked for 5 years, an we now own 5 properties. So after 10 years of owning each property, in this example you'd have about 92k. Okay.

Each child costs about $290k per child per 18 years. 

By the time your child turn 10 years old, in theory you could sell the first 3 properties after their 10 year time frames and would cover about $275000 worth of their expenses! That's about $14,000 short of the  $290,000 needed per child, but if you're cash-flowing on each property for those 10 years, the cash flow even at $100/month over 10 years puts you way over that 290k amount!

Or, you could sell the 4th house hack property for extra cushion.

If you decided to sell all 5 properties over those 10 year time frames, In total, you're looking at just under $460,000 in proceeds! That's a remainder of $170,000 you could put towards a college fund, a retirement account, or - if you find that you like being a landlord and what rental properties can offer - that $170k can be rolled into another property! Be sure to check out my video on the 1031 exchange if you would like to defer the tax on the gains!

Now you might be thinking, "I want 2 children. or 3 Children" 

Here is Scenario 2: 20-Year Investment

The cash flow from each property should be helping off-set some of the expenses that come with having kids. If you are a hyper-investor and got some good deals, the cash flow could be covering a majority of those expenses! Especially be year 15-20 where your cash flow has gone up over time with inflation and rent increases.

But if you decided to sell, after 20 years on each property, your equity is sitting around $220,000 per property.

Almost identical to the first scenario, you could sell your first 3 properties after their 20 years and collect roughly $660,000 total. 

Assuming you have 2 kids, If each child costs 290,000 per 18 years, you'll have about $80,000 leftover! 

If you have 3 kids that cost an average of 290k over their 18 years, those 3 kids will cost $870,000.

selling that 4th property will give you a grand total of $880,000, leaving you $10,000 leftover.

If you decided to sell all 5 properties, after covering the costs of your 3 children over those 18 years, Selling that 5th property would give you an additional $220,000 to put towards whatever you want for them, or for yourself.

Of course, again i have to remind you, the market fluctuates, rates fluctuate, and obviously - cost of living fluctuates. These are all variable and subject to change. These are just to keep things simple and show what these situations could look like in a perfect world. Always do your due diligence and evaluate your current situation before making a financial decision.