Are you worried about not being able to pay your child’s college tuition one day? If so, today we’ll discuss one way you can pay for it using real estate.
The average college tuition is $100,000 for a four-year degree. It’s estimated that in 15 years, this number will rise to over $207,000.
Further to that, studies show that the average college graduate earns 89% more than a worker with only a high school diploma. Each year of school adds 5% to 15% on their annual earnings later in life.
With this information in mind, there are four ways people typically pay for college:
1. Parents pay for it with their regular income. Parents are taxed on their income, so the average degree will end up costing more like $130,000.
2. The student works through college to pay for it. This typically extends how long the student is in college and increases the likelihood of them dropping out.
3. Student loans. Students today are burdened with incredible amounts of debt.
4. Owning assets. Through the passive income of owning such assets as real estate, the parent can pay for college in part or in full.
This last method is what I want to discuss in more detail.
Imagine that your child will go to college in 15 years. Suppose also that you bought a rental property for $200,000, with a 20% down payment of $40,000. With the typical mortgage today, you’ll probably be making some cash flow, but suppose you put all of that back into the house for those 15 years. By that time, the house will have been completely paid for.
At that 15-year mark, that house could be worth $300,000 to $400,000. This asset would more than allow you to pay for your child’s education.
There are many ways in which we can work to make this happen for our clients. I know some people who will buy one property for each child, knowing that they will easily pay for tuition.
If this is of interest to you as a parent or grandparent, or if you know of someone who would benefit from this information, please reach out to me anytime. I would be glad to walk you through these concepts in greater detail and give you advice about how real estate investing can improve your or your child’s life.