Using Real Estate Investments to Pay for Your Kids College

By Alan Rosenthal

If you have children like my wife and me, it’s probably a big goal of yours to send your kids to college. My oldest son, Eric, is 16 years old and in two short years will hopefully be in the university of his choice. Right after he was born, I began saving to cover the costs of future college tuition. But, simply putting aside money is not enough. Since then, I’ve learned a lot and am doing things differently for my other two sons, Blake, 3 years-old, and Shane, 4 months-old.

For them, I’ve purchased a house to help with college costs. Think for a moment, if you invested in real estate property 10 or 15 years ago in a well researched area for the sole purpose to hold long term and to pay for your child’s cost of college, you’d be in pretty awesome shape now.

Here is what I did for Blake and later for Shane:

About 3 years ago I purchased an investment property for Blake worth approximately $120,000 at the time. Because I bought it right, a foreclosure in Texas, it only cost me $97,500. Now the house values approximately $150,000. It was purchased with a 20% down payment on a 30-year fixed rate mortgage. Ever since the house was bought, I’ve put positive cash flow back in the mortgage to pay it off quicker. In the past 3 years the positive cash flow has grown and I’m confident that the trend of increased money, through appreciating rents will continue. With almost complete certainty, this house will be paid off in the next 15 years, maybe a lot sooner.

But what does this do for Blake? A house worth $120,000, in 2004 dollars, bought for $97,500 that should continue to increase in value during the time it takes Blake to reach college age. The house should appreciate at least at the ever-increasing rate of college tuition, hopefully more. Figuring that the cost of college would be around $100,000, I bought a house worth $120,000. Just in case the cost of college would rise faster that the anticipated appreciating of the home, I took a margin of approximately 20% upon purchasing.

So in 15 years, most likely a lot sooner, I’ll have a house completely paid for to use for Blake’s college. At that point, I can pull money out, sell it or do a 1031 Exchange to whatever city Blake wants to go to college.

In doing a 1031 Exchange, I defer taxes on the capital gains and use that money to purchase a house or small apartment building near campus. Therefore, Blake has a place to live, and will learn to manage the house/small building by renting rooms or apartment units to other students. The positive cash flow would cover Blake’s cost of school and he’ll live in the house or one of the apartment units rent free.

What a great way to cover college expenses as well as help teach him the ins and outs of the real estate business.

To learn more about how Real Estate Investments can help secure your family's financial future, go to Dr. Alan Rosenthal's website at FinancialHealthRealEstate.com where you can find more great investment information. And while you're there, please sign up for your FREE Financial Health Real Estate Starter Package full of tips, newsletters and much more. Plus, you are cordially invited to attend one of his real estate investment workshops by visiting FinancialHealthRealEstate.com/UpcomingEvents.html. For additional information listen to one of Dr. Alan Rosenthal’s investment talks at FinancialHealthRealEstate.com/InvestmentTalks.html.


Home About Dr. Rosenthal Rave Reviews Upcoming Events Credit Repair Solutions Articles and Resources Products Ask Dr. Rosenthal Schedule an Appointment FAQs Blog Contact Us	Using Real Estate Investments to Pay for Your Kids College By Alan Rosenthal If you have children like my wife and me, it’s probably a big goal of yours to send your kids to college. My oldest son, Eric, is 16 years old and in two short years will hopefully be in the university of his choice. Right after he was born, I began saving to cover the costs of future college tuition. But, simply putting aside money is not enough. Since then, I’ve learned a lot and am doing things differently for my other two sons, Blake, 3 years-old, and Shane, 4 months-old. For them, I’ve purchased a house to help with college costs. Think for a moment, if you invested in real estate property 10 or 15 years ago in a well researched area for the sole purpose to hold long term and to pay for your child’s cost of college, you’d be in pretty awesome shape now. Here is what I did for Blake and later for Shane: About 3 years ago I purchased an investment property for Blake worth approximately $120,000 at the time. Because I bought it right, a foreclosure in Texas, it only cost me $97,500. Now the house values approximately $150,000. It was purchased with a 20% down payment on a 30-year fixed rate mortgage. Ever since the house was bought, I’ve put positive cash flow back in the mortgage to pay it off quicker. In the past 3 years the positive cash flow has grown and I’m confident that the trend of increased money, through appreciating rents will continue. With almost complete certainty, this house will be paid off in the next 15 years, maybe a lot sooner. But what does this do for Blake? A house worth $120,000, in 2004 dollars, bought for $97,500 that should continue to increase in value during the time it takes Blake to reach college age. The house should appreciate at least at the ever-increasing rate of college tuition, hopefully more. Figuring that the cost of college would be around $100,000, I bought a house worth $120,000. Just in case the cost of college would rise faster that the anticipated appreciating of the home, I took a margin of approximately 20% upon purchasing. So in 15 years, most likely a lot sooner, I’ll have a house completely paid for to use for Blake’s college. At that point, I can pull money out, sell it or do a 1031 Exchange to whatever city Blake wants to go to college. In doing a 1031 Exchange, I defer taxes on the capital gains and use that money to purchase a house or small apartment building near campus. Therefore, Blake has a place to live, and will learn to manage the house/small building by renting rooms or apartment units to other students. The positive cash flow would cover Blake’s cost of school and he’ll live in the house or one of the apartment units rent free. What a great way to cover college expenses as well as help teach him the ins and outs of the real estate business. To learn more about how Real Estate Investments can help secure your family's financial future, go to Dr. Alan Rosenthal's website at FinancialHealthRealEstate.com where you can find more great investment information. And while you're there, please sign up for your FREE Financial Health Real Estate Starter Package full of tips, newsletters and much more. Plus, you are cordially invited to attend one of his real estate investment workshops by visiting FinancialHealthRealEstate.com/UpcomingEvents.html. For additional information listen to one of Dr. Alan Rosenthal’s investment talks at FinancialHealthRealEstate.com/InvestmentTalks.html. ©2008 Financial Health Real Estate, Inc.