How many Roofs pay for college? - Real Estate Investing, A Great Choice for Parents
Parents work tirelessly to make sure their children want for nothing, but as they grow older, they start to realize that their kids’ expenses are growing as well. In the current economic climate, it can be difficult for many parents to think of solutions to large future expenses, like college.
Investing in real estate is a great way to prepare for your child's education and provide them with a head start in life.
If you have young kids and want a safe investment plan, consider real estate investing. A lot of parents see real estate as a great choice for their children's inheritance because, over the long-term, it has been proven to be a profitable investment. Real estate is a solid asset that can provide financial stability and cash flow for your family for generations. One of the magnificent things about real estate is that there are diverse ways to invest - from owning single homes & apartment buildings to becoming part time online landlords and everything in between.
The bad news for most parents that are supporting their kids and trying to help them finish college is that a ton of people end up not completing their degree because they're short on cash. The average public university student borrows $30,030 to attain a bachelor’s degree. This amount is an enormous deterrent to finishing their degree. The prohibitive cost of tuition has caused many students to take loans which are difficult to pay off when they are in their 20s. In tough economic times, scholarships, student loans, and part-time jobs are often the only options. Another option is an early start real estate investing. Investing in property can offer a lucrative way to help them earn their university degree without the need for a hefty bank loan.
Helping your children attain a college degree will almost definitely require more than your salary alone. You will absolutely need to do your research, but there are two strategies you need to begin:
DEVELOP A PLAN
With the cost of an estimated private four-year college at around $40,000, it's not hard to see why many parents can't support their kids all the way through school. Having a plan is key if you want to make sure you're financially prepared for their educational needs.
Sample Scenario* –
$12,000 a year for college = $48,000
$48,000 / 18 years = $2,667 a year
$2,667 / 12 Months = $222 a month
$150,000 Property
20% Down Payment – $30,000
$150,000 Property x 8% Projected Return (Cap Rate) = $12,000 Income (NOI)
$12,000 / 12 Months = $1,000 per month
Estimated Mortgage Payment, Taxes & Fees = $758
Profit after Mortgage Payment, Taxes & Fees = $242
As you see in the scenario above, it would take several years before you see the fruits of your labor. However, starting when your child is young, puts you at a tremendous advantage.
*This example is very generalized with estimates. Each property is going to have its own expenses, taxes, and nuances. Consult professionals before investing.
Pre-Kid or Down payment saving
If you don’t have children yet or are considering earning/saving for the down payment, take some time to learn from the experts. Here’s some great articles that will give you ideas on how to generate the down payment.
How To Save For A Real Estate Down Payment: 20 Financial Experts Share Their Tips - https://www.forbes.com/sites/brandonturner/2016/09/06/how-to-save-for-a-real-estate-down-payment-20-financial-experts-share-their-top-tips/?sh=1a5347023dd7
Earn Extra Cash As A Landlord---How To Start Saving Up For Your First Rental Property –
https://www.moneyunder30.com/saving-up-for-your-first-rental-property
How to Save for a Rental Property in a Year –
https://www.realwealthnetwork.com/learn/how-to-save-for-a-rental-property/
Consider buying property near your home so that you can reach it in an emergency if you need to. Try to contact mortgage brokers and real estate agents in your area. Real estate attorneys or other investors may be able to give you guidance on your local market. Grow your network of local real estate professionals.
Becoming a successful investor is not a simple undertaking. You will need to be patient and diligent to do well. More importantly, you need to devise a solid investment plan to preserve your assets over the long term. A strong investment plan is not just about buying property. It means truly understanding the risks and rewards connected to the asset class.
START EARLY
The cost of college tuition has been going up for a long time. Most parents find themselves in a position where they need to take on 2nd jobs or take on financial risk to pay the hefty price. The best way to do this is by saving for it and investing early on - preferably when your kids are still toddlers! This way, you will have enough money set aside for your children to cover their education over the long run, while also building up your retirement fund and creating tax benefits.
The Little Ones are cheap!
Most parents don't want to get into the real estate business because they're afraid their children will need all their money early on. From what my friends tell me, kids get more expensive later when they need ballet lessons, braces and cool sneakers. One way to beat the system is to start investing now. If you have an older child, only a few years away from getting into college, it can be hard to prioritize setting aside funds. It also pushes you into short-term thinking which can make you take on unnecessary risk. Setting the stage early gives time to learn your market & can help you make better decisions.
Time Is on Your Side
Even if you encounter downturns, you have enough time to recover. If we examine previous economic recessions, we can see that even if you experience some downturns, the economy, as a whole, will recover and exceed expectations. Initial complications might be lower cash flow and higher or unforeseen expenses. Eventually, you'll get to the point where your expenses are manageable and you're able to maintain steady cash flow. The timing of sending your kids to college can coincide with a refinance or the compound saving of cashflow.
The cash flow from your investments should be protected so that when your child needs tuition money, it is available. Something simple like a savings account or a bond, to insure safety and accessibility. When your child is already in college, you can slow down and be less aggressive with your investments and hopefully move into maintenance mode.
Don’t be overwhelmed. Real estate investing may feel difficult but if you’re actively learning and surrounded by a supportive team of professionals you can make profitable choices. Commit yourself to study real estate investing and begin to organize a plan to find the necessary capital.
What are you waiting for? It's never too early to plan for college. Invest in something that will help educate your children and build generational wealth. With manageable down payments and the safety of property ownership, as investments go, it's an outstanding choice. -Gardner Rivera + The Paper City Group