[ad_1]

Join the movement at Inman Connect Las Vegas, July 30 – Aug. 1! Seize the moment to take charge of the next era in real estate. Through immersive experiences, innovative formats and an unparalleled lineup of speakers, this gathering becomes more than a conference — it becomes a collaborative force shaping the future of our industry. Secure your tickets now!

College has gotten shockingly expensive. Think $42,162 for the average private college tuition in the 2023-2024 school year. 

It’s enough for many parents and kids to rethink whether they even need a degree in today’s world.

But if you do want to help out with your kid’s tuition, real estate investments can help. Try these six creative strategies to lighten the load — and maybe serve double duty to help your retirement nest egg as well. 

1. Let tenants pay for tuition

Say you buy a rental property the year your child is born. To finance it, you take out a 15-year mortgage, which probably doesn’t leave you much cash flow in the first few years. But as long as it’s cash flow-positive, over time rising rents will pull away from your fixed mortgage payment, and you’ll start pocketing more money each year. 

After 15 years, your tenants will have paid off your mortgage entirely. You now own the property free and clear, with 15 years of appreciation to boost the value. You can sell the property, which may well cover all of your child’s education costs. 

Better yet, keep it and repeat the cycle all over again. Take out another mortgage, letting you pocket 75 percent to 85 percent of the property’s value (to cover tuition). Then let your renters pay down the mortgage all over again. 

Rinse and repeat as a source of retirement income for you and a tax-free inheritance for your child, since the cost basis resets upon your death. 

2. Multiply your portfolio with the BRRRR method

Imagine if you could recycle the same single down payment to buy property after property after property?

You can, but it takes some work on your part. 

The BRRRR method stands for buy, renovate, rent, refinance, repeat. Think of it like flipping houses to yourself: You buy a fixer-upper, renovate it, then refinance it with a long-term mortgage to keep as an income property. 

Here’s the trick: When you refinance, you pull out all of your initial investment, so you no longer have any cash tied up in the deal. You can do that because lenders use the after-repair value (ARV) when they calculate your allowed refinance amount. 

In this way, you can take the same $50,000 and build a portfolio of 10, 20, 30 rental properties. All cash flowing and appreciating between now and when Junior goes to college. 

It’s a way to pursue “infinite returns” by recycling the same capital into multiple investments. 

But it’s not the only way. 

3. Infinite returns on passive investments

On the plus side, you can repeat the BRRRR cycle once every three to six months. You could theoretically recycle the same down payment four times in a single year, to end the year with four rental properties with none of your own money tied up in them. 

On the other hand, it takes a lot of work to renovate properties. Just ask any house flipper, and they’ll tell you it’s more than a side hustle. 

I don’t have time for all that anymore as an entrepreneur, father and expat. I just want to invest passively and let my money multiply on its own. 

Fortunately, you can invest in passive real estate for the same strategy. It works like this: You invest in a real estate syndication, and they renovate the property. After a couple of years — during which they hopefully pay you cash flow — they refinance the property and return your capital to you. 

You keep your ownership interest in the property and keep collecting cash flow. Like the BRRRR strategy, you can recycle the same investment capital in multiple deals. Do this for a decade or two, and see how many streams of cash flow you can build up.

And no, you don’t need huge amounts of money to invest in real estate syndications. In our passive real estate investing club, we go in on new deals together each month, many of which pursue infinite returns. 

4. Flip houses with your teenager

If you like hands-on investing, consider going in on a deal with your college-bound teenager. 

Sure, you and they will earn some money together, which they can put toward tuition. If a flip pays you $50,000 in profit, that might cover two years’ tuition.

But just as importantly, they’ll learn valuable life skills. They’ll learn how to negotiate, how to invest with other people’s money and how to calculate returns.

They’ll learn how to hire and manage contractors and, ideally, swing a hammer alongside the contractors to learn home improvement. They’ll learn how to navigate permits and inspections and how to market and sell a property. The list goes on. 

Best of all, they’ll have a sense of ownership in having paid for their own education. Maybe they’ll actually show up for those 8 a.m. classes if they have to install tile all summer to afford them. 

5. House hack through your kids

Instead of paying for housing for your son or daughter, why not let their friends pay for it?

You probably understand the concept of house hacking, where the rent from housemates or neighboring units covers your mortgage. What you might not know is that you don’t have to live in the property yourself — your adult child can fulfill the owner occupancy requirement.

Some mortgage lenders refer to these as “kiddie condo” loans. You and your child buy a property together, both sign on the loan and both appear on the title. 

You get the owner-occupied loan with the low down payment and interest rate. But only your child has to live in the property. 

Picture this: You buy a four-bedroom house or even a small multifamily property. You rent out every bedroom at the going rate, and your child manages the property. You earn a healthy cash flow on the property each month, and your child gets to live there for free. 

When they graduate, you can decide whether to keep the property for ongoing rental income or sell it and reinvest elsewhere. 

6. Tap your Roth SDIRA

Roth IRAs are incredibly flexible since you’ve already paid taxes on them. You can withdraw contributions at any time, penalty-free. 

You can also withdraw earnings tax- and penalty-free before age 59.5 for qualified education expenses, including:

  • Tuition and fees
  • Books and supplies
  • Equipment needed for attendance
  • Special needs related to attendance

And with a self-directed IRA, you can invest in real estate.

That could mean buying an investment property, of course, or you can invest in passive real estate, such as a note, fund or real estate syndication. 

Get creative in combining strategies

There are endless ways to invest in real estate, often in combination.

Investments grow tax-free in a Roth IRA — which makes it a particularly great place to hold investments for infinite returns. 

Imagine that you combine seller financing with the BRRRR method so you don’t even have to put much of your own money in — or flip land or invest in mobile home parks or buy non-performing mortgage notes or wholesale properties. 

In fact, you can use the same real estate strategies to pay for your kids’ college education as you use to retire early. Get creative, find one or two perfect strategies that you want to master, and then work them until tuition troubles are a distant memory. 

G. Brian Davis is a real estate geek and co-founder of SparkRental.

Get Inman’s Property Portfolio Newsletter delivered right to your inbox. A weekly roundup of news that real estate investors need to stay on top, delivered every Tuesday. Click here to subscribe.



[ad_2]

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *

AirPro Heating and Cooling providing furnace repair and installation in Bismarck, North Dakota and surrounding areas like Mandan, Wilton, Beulah, Hazen and more.