Here’s Why Brandon is Wrong

Let me start off with my congratulations to Brandon and his wife on the birth of their first child, Rosie. Being a parent is the hardest thing I’ve ever done and I applaud you both for all the love and effort that goes into turning a small helpless blob into an adult.

I’ll cut Brandon some slack, he’s probably not sleeping much. However, I think it’s important to set the record straight. I read Brandon’s article about fully funding Rosie’s college education by the day she was born. Clever!

Where I disagree strongly is that Brandon thinks he’s solved the spoiled brat entitlement challenges that might come along by offering Rosie training in real estate once she’s been gifted this fourplex. Uh. Wrong. This isn’t enough. Without skin in the game, the lessons you are teaching Rosie aren’t sinking in. The fourplex remains a gift, and she won’t really learn.

I’m a parent of two hard working daughters. They started by selling cookies they made to neighbors. They had quite a few lemonade stands. Now, at ages 10 and 13 they babysit and mow lawns. This year I hired and trained them to help me with our own real estate portfolio. They scan docs, but also run spreadsheets and do analysis on properties. They do my QuickBooks. I couldn’t keep them busy enough. Now they’re doing bookkeeping for some of the folks from my REIA. Why do they need so much cash? Because they are partial investors in some of my properties. They came up with the down money, and now they own a percentage of multiple properties. Our agreement outlines that they get a percentage of the cash flow and appreciation, but are also on the hook for a percentage of expenses.

Why does this matter?  Without their own cash in the deal, the lessons are very superficial. Once they have skin in the game, the lessons are amplified.

Know when it really sunk in? We had a tenant break their lease, move out early, and leave a ton of repairs in a property that they each had partial ownership. There were tears. There was anger. There was desperation. “Mom, do I have to pay for this?” Yes you do! Turns out reserves are pretty important. It only took once for them to learn this extremely valuable lesson, and I think it cost them each $50. One daughter established a separate account for her reserves while the other has a different technique and keeps her balance above her reserves threshold. I can tell you that lesson was powerful. Without their own cash in the deal, this event would have been lost in the noise.

So Brandon, I applaud your ingenuity in paying for college. It’s awesome. However, make sure you don’t stop there. Don’t give Rosie the fourplex. Teach her all the skills to earn the money. Let her make the buying decision.  Have her own skin in the game. Yeah, teach your kids how to cheat. Unfortunately, you’ll have to wait a few years to do that.

Oh, and by the way. Parenting 101. If you hold a baby above you face to face after she’s just eaten, keep your mouth closed.