Student loan debt is crippling for fresh-out-of-college job seekers, but is becoming more and more the “go to” plan for education past high school. 529 plans are fine but put a long term cash drain on the parents especially if the have multiple kids. Bite by bite, just about anyway you go about saving, you wind up having to pay a significant amount of money out of your pocket to fund your kids education.
I can hear you thinking now… THERE HAS TO BE A BETTER WAY!
I’ll give you a few sentences of assumptions to set this up. Let’s for example say you plan on having 3 kids and giving them all $50,000 towards their college education. Kids go to college at 18. Paying for college sucks. In this example we’re also going to pretend that 15 years from now the market hasn’t appreciated at all which is unlikely historically. (We will assume that your [future] kids appreciate you for paying attention early on.)
NOW: With that in mind, if you buy a rental home worth $150,000 (so that all 3 kids have an equal $150,000) with 20% down and a 15 year loan you’re looking around the $1,100 per month range on your payment. Assuming you can at least get 1% of purchase price in rent you’ll be making $400 a month on top of your mortgage. Now that is pretty sweet. But $400 a month over our kiddo’s life won’t get us where we need to go fast enough. Plus, you’ll probably need that for the occasional maintenance and fix up on the property to pay a contractor to keep it up and running. OH! But we forgot about equity build up.
You see, after 15 years you own the house free and clear. You can sell it, and have $150,000 IN CASH(!!!) to write a check to any higher learning institution you want. Hopefully the same one your darling child goes too.
All those rent payments add up and you have your money back and college paid for, by someone else.
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