What if there was a way for someone else to pay for your children’s college education and your retirement? In today’s blog I’m talking about buying real estate to fund education or retirement plans.
Most people I know are currently contributing to a 401(k), IRA or other retirement fund. If you also have kids you’re likely to fund a 529 education plan. There are some great tax benefits to each of these programs which has made them so broadly used. These have been commonly promoted as the best way to save for education and retirement. However, there is an alternative way to save for these life events and I’m going to share it with you now.
- Buy a property
- Find a tenant to pay your property off over the next 15-30 years
- Sell the property to pay for college, retirement or whatever your heart desires
Too good to be true? It’s not, people are doing this with very minimal upfront investments to help fund their financial goals.
For example, you purchase a property the day your child is born for $150,000 using a 10% down payment you fund from your current home’s equity or your savings. Using average historical appreciation of 3-5% your home would be worth $247,000-$343,000 in 18 years. The best part being your tenant is the one making the monthly payments and drawing down your mortgage principal. An average four year college degree costs $80,000-180,000. Using just $15,000 that’s probably already sitting, your current home can be worth over $250,000 in less than 20 years. That’s enough money to pay for college and give your child a nest egg to purchase their first real estate investment. <Insert mind blown emoji here>
My dear friends and clients, Nikki and James, are using a similar strategy to save for retirement. When they outgrew their first home they bought a new bigger home using the equity they’d already earned in their first house as a down payment. Instead of selling their first home they refinanced to a 15 year mortgage and converted the home into an Airbnb rental. The home now more than pays for itself and isn’t a burden since they hired a professional property manager who takes care of everything. When they’re ready to sell this property at retirement age in 25-30 years their investment will be worth roughly $1 million dollars. Not to mention after the 15 year mortgage has been paid off this will provide a monthly passive income stream. Not bad right!?!
I love how versatile investing in real estate can be. I talk with a lot of people who become overwhelmed by the process. I pride myself on guiding, coaching and educating people on how they can achieve their financial goals through real estate. Each and every scenario is different and I’ll work with you to create a custom plan to meet your needs.
Lindsay Fricks, Helping you and your family Live and Love in Arizona!
