Parents, with children getting closer and closer to entering college, may also be feeling stress because they haven’t saved enough for tuition and other expenses. It’s estimated that the average cost for the 2015-16 school year is $32,405 for private colleges, $9,410 for state residents of public colleges and $23,893 for out-of-state residents.
If you started saving the year your child was born, you’d have to save $4,608 per year for 18 years at 5% to accumulate $129,620. If you waited until they were 10 years old, you’d have to save $13,574 per year to have the right amount. Saving enough can be difficult if you have a lot of time but if you only have a short time to meet your goals, it can seem impossible.
Student debt is one way to handle the tuition but many parents are reluctant to saddle their children with the obligation. Currently, there is more than $1.2 trillion in outstanding student loan debt to 40 million borrowers with an average balance of $29,000. Some economists suggest that this debt is delaying would-be buyers from making their first home purchases.
There is another way to pay for the education by making an investment in a rental property. Rents are continuing to rise, homes in owner-occupied neighborhoods are appreciating and the leverage due to borrowed funds can be a huge help in building the equity to pay the tuition.
Rent the home and maintain its condition over the years. As the loan amortizes and the value increases, the equity will grow. When your student is ready to start college, you'll actually have several options.
You can sell the property; pay the tax on the gain at the reduced capital gains rate and fund the education. Another option would be to refinance and take the proceeds to pay for the tuition. This would allow you to continue to own the asset but would free your equity. Under current tax laws, it is a non-taxable event.
In effect, your tenants are paying to send your kids to college.
Author:Melissa Hardman Phone: 319-269-0304 Dated: May 31st 2016 Views: 5,179 About Melissa: ...
My name is Carl Ericson and I am a REALTOR with Oakridge Realtors in Cedar Falls, Iowa. I am in my eleventh year as a REALTOR. I work in Cedar Falls, Waterloo, and surrounding communities including Waverly, Hudson, Dike, Denver, and Evansdale.
I specialize in residential sales, investment properties, and new construction. Through hard work, experience and knowledge I become my clients real estate consultant. I helps my clients make sound real estate decisions and consult with my clients when they are contemplating a future real estate move.
I graduated from the University of Northern Iowa with a B.A. in Management: Business Administration and a Real Estate minor. I was involved with Rho Epsilon real estate club while I attended the University of Northern Iowa.
I have called the Cedar Valley home since 1987. I grew up in the area and believe that the Cedar Valley is truly a great place to live. I believe the Cedar Valley offers many features for people to enjoy including: arts and entertainments, sports, recreation, shopping, quality jobs, a great atmosphere, and much more.
If you are thinking about a real estate move, please contact me for a personal consultation.
Carl Ericson | Realtor®
Licensed in Iowa | #S43269000
Oakridge Realtors | 3313 Terrace Drive, Cedar Falls, Ia 50613