I want to give you a different way to think about college savings. How can you save cash readily available for your kids’ college? Here’s a strategy that will help you save for your son/daughter bachelor’s degree.
It’s simple if you think about it in terms of real estate investments. If you purchase one Boston condo for each kid (and it doesn’t even have to be here in downtown Boston), by the time they’re 18 years old and headed off to college, you would have the equity needed to fund his/her college education. As a bonus, you can save money by providing them housing if its near their college they attend.
The best part is that you’ll have a tenant paying the mortgage for you. The amazing thing is that we literally live in a world where if you put down 25 cents for every dollar, a bank will give you 75 cents and charge you about 3.5% on investment property interest rates. Then, you’re going to have a tenant who will act and feel like the owner, when in reality, they’re paying off your mortgage.
Say you bought a Boston condo worth $600,000 and you put 25% (or $150,000) down and have a tenant for 18 years. If we look at prices and values historically, over that 18 years, the value of that house is going to have doubled, roughly. Now, we’re talking about a $1,200,000 condo with some of the mortgage having been paid off. On the $450,000 you borrowed, you now likely only owe about $250,000. In this scenario, you’d have roughly $950,000 of equity that you can sell to fund your kids’ college.
If you do this for each of your children, you can see the power of making a real estate investment for future savings. You could also use this type of savings for retirement, taking care of a parent, or any number of things. Remember the best part–you get somebody paying off the loan for you while the market also works to your benefit. Even better is that currently with the mortgage rates being as low as they are, you’re going to have cash flow, and you can lock in that rate for 30 years.
If you have any questions about the Boston luxury condo market please call me at 617-595-3712.
Updated: 1st Quarter 2018