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Rental Real Estate Can Help Ease the Cost of College

Posted by: laurenc 4 years, 6 months ago

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Four years of tuition and living expenses at a state university easily costs $80,000, and the bill for four years at many private institutions can exceed $200,000. Many parents are struggling to meet the risings costs with traditional methods of saving. 

Parents turn to college 529 plans, stocks, savings accounts, Treasury bills, and mutual funds to save for this expense, but many still often fall short of what’s needed to meet rising college costs. The traditional methods of saving and investing for their child’s future education aren’t working, and parents are desperately seeking a viable alternative. Many don’t realize that the answer might be rental real estate.

The concept is simple enough. Acquire a property with a 20 percent down payment and borrow the rest. Tenant rent can cover the loan payments and expenses and, over time, help build up equity. The result is a paid-off asset that can help with future college expenses. No “flipping.” No predictions of appreciation. Just old-fashioned, rental real estate.

Why Should You Buy?

That is what we are here for! We can discuss with you the realistic advantages of owning a rental property and how tenant rent can contribute to equity and help cover future college expenses.

Here’s are some of the advantages of investing in rental real estate:

  • Leverage: Invest a small amount of money (the down payment) and control an asset worth much more.
  • Forced savings: Each mortgage payment reduces what’s owed on the loan and increases the owner’s equity.
  • Tax benefits: Taxes, loan interest, repairs, improvements, and depreciation can all be eligible as write-offs.
  • Inflation hedge: Historically, housing value has increased at the rate of inflation or more.
  • Potential appreciation: There’s no guarantee, but buying a property in the right location can increase the chances of profit.
  • Psychological security: You own and control the asset and make the important decisions. With mutual funds and other investments, you’re at the mercy of managers and hidden fees.
  • Tenant rent: Tenant rent pays the loan principal, interest, taxes, insurance, expenses, and increases your equity each month. With a 15-year loan term made at the correct time, that rent could pay off the real estate debt as your child is entering college.

How We Can Help

Purchasing a rental property is not the same as buying a personal residence. A residential purchase is based more on emotion and family needs. A rental property should be approached with a business mentality, where numbers displace emotion.

Finding the right rental property at the right price in the right location is important. It isn’t necessary to own in a community where a child plans to attend college. It’s more important to find a property that the buyer can comfortably afford and where tenant rent can cover the mortgage and expenses. We can help you find great rental opportunities, and provide you with the following information to help you make a great investment: 

  • Rental rates in the area of interest. This will help determine a price range, as rent should cover the PITI of a loan and potential expenses.
  • A list of lenders who grant fixed-rate loans to investors with a 20 percent down payment.
  • Potential growth areas and neighborhoods where rental vacancies are low and demand is growing.
  • A list of property management companies for buyers who may not want to manage.
  • A list of competent agents to which you can refer potential buyers and pre-prepared referral agreements.

If you have any questions, or are considering investing in rental real estate, give us a call at (619) 435-0145!

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