Grade: 2 Lesson 14
Why does real estate make a good investment
over time?
SS.4.FL.1.5 People can earn income by renting their property to other people.
SS.4.FL.4.2 Identify instances when people use credit, that they receive something of value now and agree to repay the lender over time, or at some date in the future, with interest.
SS.4.FL.1.5 People can earn income by renting their property to other people.
SS.4.FL.4.2 Identify instances when people use credit, that they receive something of value now and agree to repay the lender over time, or at some date in the future, with interest.
Investing in Real Estate
Lesson Number: 14
Correlated Florida Standards (See Full Text on Cover Page)
· MAFS.2.MD.3.8
Essential Question
Why does real estate make a good investment over time?
Learning Goals/Objectives
Students will:
· Understand the difference between buying a renting a home
· Recognize that people must often use credit for real estate purchases.
· Discover the risks and pay-offs of investing in real estate investment by participating in a game of Monopoly.
Overview
· Students will explore the advantages of investing in real estate. They will discover the factors associated with the purchase of a home and the benefits of having a rental property.
Materials
· PowerPoint Presentation: Grade 2 Lesson 14 – Investing in Real Estate (Included in Lesson 14 File)
· Monopoly Board Game (one board game per every four students)
· Handout: Is my rental property profitable? (included within lesson)
Time
· 30 min.
Activity Sequence
INTRODUCTION/HOOK
Ask students if they have ever heard of “Real Estate.” Discuss the meaning of real estate with students. Then display and discuss PowerPoint slides 1- 2.
Do: Ask students if they are familiar with the board game Monopoly. Explain that in the game, each player begins with a fixed amount of money and must take opportunities to gain control of the Monopoly board by investing in real estate. (In the game of Monopoly, students will quickly learn about risks and pay-offs. Through Monopoly we can learn that instead of relying only on your wage for income, look closely other assets such as real estate and what they can do for you.) (2 minutes)
ACTIVITY
1. Discuss PowerPoint slides 3-8 (8 minutes)
· Do: Explain to students that in the Monopoly game, when a player lands on one of your properties they must pay you rent. The more houses and/or hotels you have on your property, the more money you will make. The greater number of properties you own, the greater the chances of someone landing on your property and having to pay you rent. In real life, one way to make your money grow over time is to invest in real estate. (Since the game began in 1935, it has been introducing children to the concept of investments and personal finances.)
· Say: Close to 70% of adults in the US own their homes. A family’s home remains one of their greatest financial assets and wealth throughout their financial life.
· Say: Most homeowners don’t have enough cash to buy a home, so they get a mortgage loan from a bank. In order to qualify for a mortgage loan you must have enough income, good credit, and money saved up to pay for a down payment and other costs. They must commit (promise) to paying back the loan within 30 years with interest. Borrowing money is convenient but it comes at a cost.
· Say: Banks do not loan you money for free. The fee you pay for borrowing money from a bank is called interest. The graph below shows the cost of borrowing for individuals with good credit and individuals with poor credit. What do you notice?
· Do: Guide students through analyzing the chart on slide 7. Illustrate the cost of borrowing money from a bank by pointing out the following:
1. If you have good credit and borrow $175,000, you will end up paying double over a 30 year period because of interest.
2. If you have bad credit and borrow the same amount, you will end up paying almost double.
· Say: You can profit from real estate in several ways. The most common way is to buy at a lower price now and sell at a higher price later. Real estate usually increases in value over time. For example, a house that sold for $50,000 in the 1970’s is now sells for nearly $500,000.
· Say: Another way to profit from real estate is to rent the property to someone else. The rent you collect each month pays to maintain the property (mortgage, insurance, taxes, repairs, etc.) . Income earned by good rental properties will cover these expenses and still give some cash to the owner after that. Rental properties are great investments because not only will their value increase over time, but someone else is technically paying off your mortgage.
2. Discuss PowerPoint slide 9-11 (20 minutes)
· Say: Now it’s your turn to experience the pay-offs of investments and the need for saving for a rainy day as you play the game of Monopoly.
· Do: Depending on the number of Monopoly board games accessible to the class, group students accordingly and explain the rules of the game on slide 10.
· Do: Explain the Monopoly game rules:
1. Each player is given $1500 divided as follows: 2 $500 bills; 2 $100 bills, 6 $20 bills, 5 $10 bills, 5 $5 bills, and 5 $1 bills.
2. Assign one player to serve as the bank, managing the banks money and holding the title deed cards, houses and hotels.
3. Each player rolls the dice, and the player with the highest number goes first, followed by the players on the left of him/her.
4. Each time a player passes go, the banker will pay him/her $200.
5. When a player lands on Monopoly property (that is not already owned by someone)and does not wish to buy it, the property is auctioned by the banker to the highest bidder.
6. If a player lands on a property owned by someone else, they must pay rent to the owner.
7. The wealthiest player that has not gone bankrupt at the end (or when time is called) wins!
CLOSURE (2 minutes)
Have students share what they have learned about investing in real estate and discovered while playing the game of Monopoly with their classmates. Revisit the Essential Question for this lesson: Why does real estate make a good investment over time?
OPTIONAL EXTENSION SUGGESTION/HOME LEARNING
Handout: Is my rental property profitable? (included within lesson)
Sources/Bibliographic Information that contributed to this lesson:
Lessons Monopoly Teaches Us:
http://www.investopedia.com/articles/basics/12/lessons-monopoly-teaches.asp
Name ______Date ______
Is my rental property profitable?
1. You own a two bedroom one bath apartment which you are renting to someone for $1200 per month. Your mortgage, interest, and taxes equal $700 per month. / What is your profit each month? ______What is your profit each year? ______
Is this rental property a good investment? Why or why not? ______
2. You own a three bedroom two bath townhouse which you are renting to someone for $1500 per month. Your mortgage, interest, and taxes cost you $1100 per month. You must also pay an HOA of $150 per month. / What is your profit each month? ______
What is your profit each year? ______
Is this rental property a good investment? Why or why not? ______
3. You own a three bedroom two bath house which you are renting to someone for $1800 per month. Your mortgage, interest, and taxes cost you $1300 per month. / What is your profit each month? ______
What is your profit each year? ______
Is this rental property a good investment? Why or why not? ______
4. You own a one bedroom studio apartment which you are renting to someone for $800 per month. Your mortgage, interest, and taxes cost you $400 per month. / What is your profit each month? ______
What is your profit each year? ______
Is this rental property a good investment? Why or why not? ______
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