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November 11, 2016

Pay for Post Secondary Education

Investment Property, rental, education,

Most people with children are continually thinking of ways to prepare and pay for post secondary education.  With tuition continually going up, and the fact that student debt is currently more than all credit card debt in the US, is a scary thought.  So how do you invest enough money to be able to pay for your children’s education, or better yet, get someone else to pay for you?

A long standing way of preparing for your children’s future, it to purchase investment properties.  The rule of thumb, was to purchase an investment property for each child shortly after birth.  If done correctly, it will be paid off (or close to) by the time the child is ready to go to university.  Once it is time for them to go to school, you have options either selling the property for a lump sum, refinancing the property, or using rental income to pay low interest student loans.  The entire process isn’t all that difficult, when everything is planned for, and followed.

In London, it would be very easy to purchase a semi-detached home for under $200,000.  The reason I choose a semi-detached, is they have a simple floor plan, decent square footage, cost much less than a similar detached home, and rent for very close to the same amount as a detached home.  If we are doing it by the book, it would require a 20% down-payment as an investment property, so $35,000 if we purchased at $175,000.  That means the balance owing would be $140,000, and at an interest rate of 4.5% (you will be able to get much better than this) the mortgage payment would be $775 per month, and property taxes would be $150 per month.  That means for under $1,000 a month, the property would carry it’s expenses as the tenant would pay for the utilities.  Now, let’s just say the property itself didn’t go up in value, and in 18 years, it is still worth $175,000.  For your initial outlay of $35,000, you now have a return of $140,000 in equity alone.  This doesn’t take into consideration any cash flow you would have made as you paid down the mortgage.  We could even say the cash flow paid for upgrades to the property (ie. new roof, furnace, ac, kitchen, etc.).

If you sold it at this point, you would have over $150,000 to pay for post secondary education, and you would have only used the initial $35,000 to get that back.  You could have also refinanced this property at some point to use equity to purchase other properties.  Really, there are a multitude of options once you purchase the first one.  I’d love to give you more information on how this can work for you to invest for your family or to get started building for your retirement.  You can contact me at 519.663.9411, jason@jasoncheese.com or on Facebook.