Lesson Plan 03 - Property

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Nigel Alexander
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1 Lesson Plan 03 - Property Curriculum Points Year 9 Year 10 Year 11 National Cosumer & Financial Literacy Framework Identify and explain strategies to manage personal finances Explain how, as financially active citizens, they fit into the broader economy and society through investing Analyse relevant information to make informed choices when purchasing goods and services and/or to resolve consumer choices ACT 24.LA.12 [Learn to] recognise opportunities to generate income and wealth, and the risk management of those opportunities [e.g. assess the advantages and disadvantages of financial ventures, develop personal financial plans that show initiative and manage risk 24.LA.2 [Understand and learn about] responsible borrowing and use of credit (e.g. types of loans, simple and compound interest charges, repayment obligations, interest free periods, reward schemes, fees and charges, mobile phone contracts) Mathematics (Data representation and interpretation) Investigate and describe bivariate numerical data where the independent variable is time (ACMSP252) 24.LA.12 [Learn to] recognise opportunities to generate income and wealth, and the risk management of those opportunities [e.g. assess the advantages and disadvantages of financial ventures, develop personal financial plans that show initiative and manage risk 24.LA.2 [Understand and learn about] responsible borrowing and use of credit (e.g. types of loans, simple and compound interest charges, repayment obligations, interest free periods, reward schemes, fees and charges, mobile phone contracts)

2 Lesson Plan 03 - Property Curriculum Points Year 9 Year 10 Year 11 NSW Commerce Evaluates options for solving commercial and legal problems and issues (5.5) Recognise the relationship between risk and return by investigating investment options Mathematics (Data representation and interpretation) Investigate and describe bivariate numerical data where the independent variable is time (ACMSP252) Commerce Evaluates options for solving commercial and legal problems and issues (5.5) Recognise the relationship between risk and return by investigating investment options NT Studies of Society & Environment (Enterprise: Financial Literacy) Apply a range of strategies in personal financial management(ent 4.1) Studies of Society & Environment (Enterprise: Financial Literacy) Apply a range of strategies in personal financial management(ent 4.1) QLD Business (Enterprise and Ventures) Entrepreneurial behaviour, skills and activities can impact positively and negatively on a variety of stakeholders SA Economics (Unit 1AECO: Personal financial planning) Explain the risk/return trade-off relating to different types of personal investment Describe the methods that could be used to evaluate personal investment decisions Examine typical pitfalls associated with personal financial investment e.g. psychological factors such as regret theory, using the past as a guide to the future

3 Lesson Plan 03 - Property Curriculum Points Year 9 Year 10 Year 11 TAS Society & History (Interconnections between systems, standard 5: stage 13) Understand the interdependence between quality of life and access to goods and services Mathematics (Data representation and interpretation) Investigate and describe bivariate numerical data where the independent variable is time (ACMSP252) Society & History (Interconnections between systems, Standard 5: Stage 13): Understand the interdependence between quality of life and access to goods and services Financial Literacy Make personal financial decisions How do I build a financially secure future? VIC Economics (Learning Focus: Level 9) Students extend their personal financial literacy skills and understanding about the role of savings and investment Mathematics (Data representation and interpretation) Investigate and describe bivariate numerical data where the independent variable is time (ACMSP252) Economics (Learning focus: Level 10) Students extend their personal financial literacy skills and understanding about the role of savings and investment WA Society & Environment (Resources) To use critical thinking and problem-solving skills to make informed consumer and financial decisions

4 Lesson Plan Property Lesson Objectives Students learn about property as a form of investment. Time Allowance 1 hour. Materials and Preparation Have the Property animation from the StartSmart Teacher Support Hub open on your interactive whiteboard or projector. Computers with internet access for students. Copies of the worksheet Property: Risks and Rewards (1 per student). Copies of the worksheets Property: For Rent and Property: For Resale (enough to divide evenly amongst the class). Suggested Introduction 1. Watch the Property animation. Confirm with students the following terms raised: 1.1 Asset: An item of value owned by someone. Expand on this by stating that a property is a tangible asset, one that physically exists. Shares, in contrast, are known as intangible assets. Ask students how tangible assets (like property and equipment, or metals like gold) might differ in terms of risks and benefits compared to intangible ones. Pros: Physically exist can hold, use or live in them. You exercise a level of control over them. Cons: Risk of damage, theft, or wear and tear. May require maintenance, upkeep and safeguarding; can be difficult to sell. 1.2 Asset-generated income: Income that can be made from that asset while the owner still controls it. This usually comes in the form of payment for rent, hire or lease of that tangible asset. 1.3 Capital gain/loss: Is the profit or loss made when finally selling the asset. If the asset is sold for more than the owner originally paid for it then a capital gain is made. If it is sold for less than the owner paid for it, a capital loss is the result. 2. Discuss with students the three ways in which property was used as an investment: 2.1 Rent: The house buyer generated income from tenants renting the house. Remind students that, for a long period of time, rent would normally go towards paying off the mortgage on the property. 1

5 2.2 Sale: The buyer made a profit from selling their house shortly after buying it. Remind students that a doubling of house prices (in this scenario) is not a steadfast rule, and that different markets move at different paces, and even different directions. 2.3 Living: Remind students that an investment s return isn t always financial. Point out that although the situation of slowly paying off a mortgage (with interest) costs a lot and might seem to have no benefit, there are in fact many positives to this situation. These include: Security: A place of your own to raise a family without the threat of having to move. Ownership: Having a home you can make your own by renovating and decorating. Savings: The owner may be saving significant amounts of money in the long run through not having to pay rent to other people. Teaching Points 1. Now you have looked at how people profit from property students will investigate the reasons why a property may be valuable and what risks are involved. 2. Provide students with the Property: Risks and Rewards worksheet. Instruct them to use the suggested links on the sheet, or any other means, to investigate what makes property both valuable and risky. The worksheet suggests some keywords to investigate, but encourage students to document and define any others they find. 3. After students have spent enough time researching the risks and rewards of property bring them back to a discussion about their findings. Drive analysis with the help of the Teacher Copy of Property: Risks and Rewards. 4. After confirming that students have been able to identify risks, cost, value and opportunity in property, evenly distribute the Property: For Rent and Property: For Resale worksheets to students. 5. Instruct the half of the class given Property: For Rent that they will be researching an investment property to rent, where profit will be made from asset-generated income. The other half of the class given Property: For Resale will be looking for a property to renovate and resell in the hopes of generating profits from capital gain. 2

6 6. Instruct students to use the web resources suggested, property-research websites, news websites, or other services such as Google Streetview, to make a case for their choice of investment. 7. After working through the activity encourage students from both groups to discuss some of their choices. Help identify ways where choices differ between renting and renovating. Also help remind students of costs they may have overlooked, such as reliance on credit, insurance costs, and estate agent expenses. 8. Conclude by reinforcing the importance of doing research prior to investing. Optional Consolidation 1. Following on from the work completed for the Property: For Rent and Property: For Resale worksheets, have students create a hypothetical sales poster or rental advertisement which captures the research completed by the students. 2. This could be followed by a role-playing activity where students are given scenario cards that describe the situations of their character, including income, employment, size of family, their preferred property s desirable amenities and features, and so on. In their character they must then choose an advertised property that suits their needs. This will help illustrate the market in action as some properties will be in high demand while others may be left without bidders.

7 Teacher copy of Property: Risks and Rewards Use these websites, or others you find yourself, to identify the risks and costs, and value and opportunities of investing in property: RISKS AND COSTS VALUE AND OPPORTUNITY Damage or Destruction: Flood, fire or structural damage can destroy your asset. Location: Suburb and proximity to places of employment, surrounding neighbourhoods. Tenants: Tenants must be managed to ensure rent payments are made on time, property is looked after. Amenities: Proximity to good schools, shops, cafes, parks, hospitals, public transport options such as rail and/or bus. Market Decline: Risk that property values in the neighbourhood, state or country may drop due to unforeseen events local, national or global. Design & Features: Features of the house that add value, number of bathrooms and bedrooms, parking spaces, backyard, swimming pool, room for renovation. Architecture. Market Entry Costs: Deposit on a loan is costly, requires steady income and savings. Future Development: Planned developments in the area that may boost property value. Other Costs (tax, stamp duty, expenses): Upfront costs: Stamp duty, legal fees. Ongoing: Insurance, repairs, rates on water, waste, land tax. Plot Size: Large plots of land may be subdivided or allow for expansive renovations. Other: Other:

8 Property: Risks and Rewards Use these websites, or others you find yourself, to identify the risks and costs, and value and opportunities of investing in property: RISKS AND COSTS VALUE AND OPPORTUNITY Damage or Destruction: Location: Tenants: Amenities: Market Decline: Design & Features: Market Entry Costs: Future Development: Other Costs (tax, stamp duty, expenses) : Plot Size: Other: Other:

9 Property: For Rent Use these websites, or others you find yourself, to identify a good property in your state to invest in as a rental property: Pick a good location Suburb: Why? Nearby amenities: Target Tenants This property suits (young family, elderly, students, etc.): Investigate the Market Property prices: High: Low: Rental prices: High: Low: Name a Price Rent per week expected: Other costs per year (repairs, rates, insurance): Pick a Property Price: Features (# bedrooms & bathrooms; other features): Number of tenants who could live there:

10 Property: For Resale Use these websites, or others you find yourself, to identify a good property in your state to invest in as a rental property: Pick a good location Suburb: Why? Nearby amenities: Target Tenants Planned renovations: Expected cost of renovations: Expected time to renovate: Investigate the Market Property prices: High: Low: Sales Plan Expected investment (property price + renovations): Years till resale: Minimum sale price needed to break even: Pick a Property Price: Features (# bedrooms & bathrooms; other features): Needed / desirable features:

Financial Education. Smart Start. Building Bright Financial Futures

Financial Education. Smart Start. Building Bright Financial Futures Financial Education Smart Start Building Bright Financial Futures Dear Educator, Virginia Credit Union believes that every high school student should be given the opportunity to learn how to manage money.