Whether your children are looking to go to college or a trade school, saving for this extra expense (while making sure you have enough money for retirement) can be difficult.
You might want to consider purchasing an investment property. A good rental home will easily rent, generate positive cash flow and pay for itself. One of the best parts of investment property is that you earn a return on the total value of the home and not just the amount of cash you have invested.
The strategy is simple. Find a well priced home in an area that will rent well. It will appeal to a larger group of people while it’s rented and when it’s ready to be sold it will be attractive to both owner occupants and other investors.
Rent the home and maintain its condition over the years. As the loan amortizes and the value increases, the equity will grow. When your student is ready to start school, you’ll actually have several options:
- Sell the property; pay the tax on the gain at the current capital gains rate and fund the education
- Refinance the property and take the proceeds to pay for the tuition. This would allow you to continue to own the asset but would free your equity and under current tax laws is a non-taxable event.
Regardless of whether you’re trying to plan for your children’s education or your own retirement, rental property offers many solid investment opportunities. Contact us if you want more information.