1. Investing in Real Estate 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. Gr. 2 Financial Literacy

2. Grade 2 Financial Literacy SS.4.FL.1.5, SS.4.FL.4.2 Why does real estate make a good investment over time? Essential Question

3. When you buy a “property” (real estate), you will “own” it. If other people want to use your property (real estate), they have to pay you “rent.” Grade 2 Financial Literacy SS.4.FL.1.5, SS.4.FL.4.2

4. Close to 70% of adults in the U.S. own their homes. A family’s home remains their largest piece of wealth throughout their financial life. Grade 2 Financial Literacy SS.4.FL.1.5, SS.4.FL.4.2

5. The Path to Homeownership Most homeowners don’t have enough cash to buy a home, so they get a mortgage loan from a bank. They commit to paying back the loan within 30 years with interest. Borrowing money is convenient but it comes at a cost. To buy a home you need….. Sufficient income Good credit Money for initial down payment and other costs Enough income to pay the loan and other costs. Grade 2 Financial Literacy SS.4.FL.1.5, SS.4.FL.4.2

6. The Cost of Borrowing Money 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? Image Source: http://www.credit-repair- mom.com/images/costofcredit.pnghttp://www.credit-repair- mom.com/images/costofcredit.png Grade 2 Financial Literacy SS.4.FL.1.5, SS.4.FL.4.2

7. 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. Grade 2 Financial Literacy SS.4.FL.1.5, SS.4.FL.4.2

8. 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. Any extra money leftover is yours! When you rent your property, your tenant is paying off your mortgage. Over time, the value of your property will increase too. Grade 2 Financial Literacy SS.4.FL.1.5, SS.4.FL.4.2

9. Now its 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. I like to buy lots of real estate, but I always have some money tucked under the corner of the board for a rainy day as you never know what a chance card is going to throw your way. Grade 2 Financial Literacy SS.4.FL.1.5, SS.4.FL.4.2

10. 226555 Monopoly Game Rules Each player is given $1500 divided as follows: One player will serve as the banker, managing the bank’s money and holding the title deed cards, houses and hotels. Each player rolls the dice, and the player with the highest number goes first, followed by the players on the left of him/her. Each time a player passes go, the banker will pay him/her $200. 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. If a player lands on a property owned by someone else, they must pay rent to the owner. The wealthiest player that has not gone bankrupt at the end (or when time is called)wins! Grade 2 Financial Literacy SS.4.FL.1.5, SS.4.FL.4.2

11. Why does real estate make a good investment over time? Essential Question Grade 2 Financial Literacy SS.4.FL.1.5, SS.4.FL.4.2

12. Sources Active vs. Passive Income: http://www.investopedia.com/terms/p/passiveincome.asp#ixzz43T gtVlQP Lessons Monopoly Teaches Us: http://www.investopedia.com/articles/basics/12/lessons- monopoly-teaches.asp Grade 2 Financial Literacy SS.4.FL.1.5, SS.4.FL.4.2