College for FREE??? I know, you’re all thinking I’m nuts, right?
Not so fast… let me explain.
I calculated out the cost for College, in state… with room and board in 15 years, as about $85,000. Ok… I didn’t calculate it out… I used a website that did it for me. Maybe it’s wrong, maybe it’s right. But lets say that you actually need $85,000 in 15 years for a 4 year, in-state college
degree. What is your current plan? Save your penny’s? Student loans? If you’re looking at college in 15 years… well, you’re way ahead of most of us, right? Or maybe you’re way behind and your looking at that sweaty, 15 year old, lump of male playing video games on your couch right now and suddenly, you need a plan.
You could try to explain to your lump that he needs to get off the couch and go throw a ball around, maybe he could get a football scholarship. Or, maybe you’re like me, and you don’t want to encourage activities that might mean you have to get up at 7am every Saturday… *shutters* Banish the thought and move on.
Maybe you could call your stock broker and commit to putting money aside every month so that maybe one day you can pay for college. Or maybe your thinking… but how does that benefit me? Maybe you could just invest in Coach? A new purse every month… resell it when the style becomes retired and boom… stylish investing.
Now… if I haven’t lost you to a new plan to become the next coach hoarder… let me tell you MY idea. (although, I will admit, my Coach plan is tempting)
I’m going to use a simple example for my plan. Tried and true.
Step One – Buy inexpensive house in a non-HOA neighborhood. (because I don’t want the costs or the head ache) Ideally, 5% down conventional loan for 15 years. Estimated payment, approximately $1,100. (don’t freak out, you could also do the economic version as we did… you’ll have to ask me about that one.)
Step Two – Rent home out for more or equal the note… Approximately $1,200 per month (you can get more… this is just typical.)
Continue to rent home out until child goes to college.
Step Three – Transfer home into Childs name (if you choose) and let them refi the home for $85,000 (or $92,500 if you want the down payment back from them). Their payment is now about $500 a month (WAY less than an apartment). They can typically rent the other 2 rooms out to other kids in their college, more than covering the mortgage and utilities. And now they own their own home.
So, lets review… You buy an investment property, rent it out for at least the mortgaged amount… paying it off by the time your kid goes to college. Now, this whole time, you’ve broken even (or made money) and at the end of the day, your kid now owns a home (does not live at home), rents the rooms to their buddies (lives for very little to free while going to school), and paid for their college.
The bonus is the home is still worth more than it’s mortgaged for. If you keep the home in your name, after your kid goes to college, you can still sell it and make a profit, or continue to rent it out and make an income of it. Plus, your kid just learned a very important money/life lesson in the experience.
College = FREE (and in a best case scenario… you just made a chunk of change in the end) Maybe you can even pay for the wedding to that rich doctor next?
*Disclaimer… I am not psychic, and therefore can not promise that aliens won’t end up taking over your college kid home. It’s also possible that a bum may ride by and throw his whiskey bottle and lit cigarette at your investment and it burns to the ground. Obviously, you’re taking a chance, no matter how you choose to invest you money. But if you decide to go the real estate route, I hope you’ll give me a chance to help out.