How? Through one single real estate investment.
The plan is simple, if not necessarily easy:
- Buy a piece of property.
- Let my tenant pay off the mortgage over the next 18 years.
- Sell or refinance the property after it has been paid off.
- Use the proceeds to pay for my daughter’s college tuition — or whatever future she wants.
For example, take a property in the local area worth $350,000. fix it up, it should be worth enough to pay it’s mortgage in the beginning, often with as much as a 6% return in today’s market; and assuming an average increase in inflation of around 3 percent, I estimated the property to be worth around $$600,000 in 18 years. This should be more than enough to cover four years of your child’s college education, their mission, or make a great gift for their start in life their start. Heck, you may even need it..
The beauty is, you aren’t the one paying for it — your tenants are.
Each month, the mortgage is paid down lower and lower, but the funds are coming from the rental income on that property. At the same time, the value of the property will likely climb each month to keep pace with inflation — increasing your wealth each and every month.
Four Steps to Paying for Your Kid’s College with Real Estate
Of course, this strategy is not going to work for just anyone who buys a piece of real estate. Instead, it took several key steps.
First, find the right property — perhaps the most important step in this process. So, spend a good amount of time prospecting for potential deals in your local market.
Second, You may need to rehab the property and make it as “tenant-proof” as possible. In other words, ensure the property looks amazing (to attract the best tenants), but also you want to use building materials that can take a beating — thus reducing the cost of maintenance over the next several decades.
Third, I’ll need to make sure the property is continually filled and maintained. You may want to hire a property manager. They can take care of the pesky tasks, to make this investment as passive as possible.
Fourth, You may need to either sell or refinance the property to pay for your child’s college. You don’t even need to necessarily sell this property to pay for her college. For example, let’s assume that the property is worth $600,000 in 18 years. You could sell the property and pay around 10 percent for sales expenses and another 20 percent in taxes, leaving around $420,000, or you simply get a new loan (refinance) for 70 percent of the value of the property — taking out $420,000 in cash.
The Greatest Benefit
Finally, this strategy is exciting because your not just going to pay for your kid’s education… it’s going to give her one.
We’ve all known kids in college whose parents paid for everything, and many of them never took school seriously. Instead, as soon as your child is old enough to understand what’s going on, this wcan become her property. She can help run every aspect of it, allowing you to train him or her in the art and science of real estate investing. They’ll graduate high school with more money smarts than anyone in her class, all while avoiding the crushing weight of college debt most students take on, thanks to one strategic real estate investment.
You know, real estate investing is a lot like parenting: plenty of hiccups, messes, never-ending questions and maybe even some sleepless nights. It takes hard work, intelligence, planning and patience. But, in the end, the beauty of what you create trumps the drama — every time.