“Planning for College: How Real Estate Can Help You Foot the Bill for Your Kids”
If you have children, chances are you’ve already started thinking about how you’ll pay for their college education. And let’s be real, college is expensive. But as a parent, you have the power to give your kids the gift of graduating debt-free. And it doesn’t have to be through traditional savings methods like 529 plans. Real estate can be your secret weapon in building a college fund for your children, whether you start early or a little later.
Option 1: Each Kid Gets Their Own Home
One strategy is to purchase a property with 20% down and rent it out. This may not be a home run, but it’s a solid base hit. With almost 20 years for the property to appreciate, you can either save the yearly cash flow in a tax-deferred account like a 529 or reinvest it. When it’s time for college, you can sell the property and use the profits to pay for tuition and other expenses. Or, you can be even more generous and gift the property to your child when they graduate. By purchasing the property in a trust or LLC with your child’s name already included, you can avoid transfer taxes and give them their first income stream before they even have their first job. Teach them how to manage the revenue and watch it pay massive dividends for their future.
Option 2: House Hacking in Your Kid’s College Town
Another option is to purchase a duplex or a house with multiple bedrooms in your child’s college town. This property should be in a desirable location, close to campus and amenities. When your child is allowed to move out of the dorms, they can move into one of the bedrooms and rent out the others to their friends or other tenants. This can provide free room and board for your child while also generating income to cover the rest of their college expenses. If your child is responsible and good at finding roommates and managing the property, you can even offer them a little spending money in exchange for basic property management.
With these strategies, you can set your children up for success and help them graduate without the burden of student loan debt. While you may need to rely on traditional savings methods for the first year of college, real estate can be a powerful tool in funding your child’s education. So don’t wait, start planning now and give your kids the gift of a debt-free college education.