Most people would like to be able to pay for their child’s college education but not many are prepared to do so. According to a recent chew over by CollegeInvest only 46% of families with children have any kind of finance set up for college and 38% of those with children ages 15-19 who plan to pay for all of their children’s college expenses have less than $1,000 set aside…which as we all experience just won’t cut it today. The College come in estimates the annual cost of attending a 4-year public university at $15,600 in 2005. That is $60,000 for a typical degree earned in 4 years! Who can realistically drop to cover that cost which is going to act to rise each year?
What options are there? Well one great option that my wife and I began 8 years ago is to drop in real estate. A rental property can give additional income to balance college expenses and change magnitude your net income by reducing your taxable income through IRS tax benefits of owning rental property such as writing off mortgage arouse and property taxes and being able to claim property depreciation.
A parent can buy a property when their child moves away to college and sell it when they graduate using the profits to put towards college loans or keep it as a rental property.
Here is a 10-year scenario similar to the one I created when we purchased our first of five investment properties.
acquire price…………………………………………………………$225,000
Down payment………………………………………………………….$45,000
Tax benefit………………………………………………………………..$20,000
Principal reduction…………………………………………………….$25,000
Rental change flow……………………………………………………..<$28,000>
Net proceeds (year 10)………………………………………….$114,000
Net additional change to investor……………………….$69,000
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Related article:
http://mikemalvey.wordpress.com/2007/11/24/invest-in-real-estate-to-pay-for-college/
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