How To Pay For College Using Real Estate
If there’s one thing your average college student is looking for these days, it’s a way to pay for college that doesn’t involve taking out student loans.
Student loan debt is ridiculously painful, yet college is all but mandatory in this tricky job market. So, what’s a poor college student to do?
How about using real estate to pay for your college debt. Did you know that you can purchase a condo and then rent it out all while building enough equity to pay off those student loans? It’s true--this process actually works!
Intrigued, are we?
This is one of the simplest ways to pay for college using real estate and we’ll try to break it down in the simplest terms possible. Ready to kick those college costs? Here we go!
If you had listened to your mom back in 8th grade when she told you to study hard, get good grades, and start applying for scholarships, you might have a full ride scholarship to the university of your choice right now and you wouldn’t be sitting here trying to figure out how to pay for school.
But, since you totally didn’t do that...like, at all, it’s time to find a new plan.
There’s no doubt in anyone’s mind that college is expensive--and the costs just seem to be going up. However, it’s essential for you to get an education that will land you a solid job and will fill your mind with all kinds of brilliant ideas.
So, college is a must, yet it’s unbelievably expensive--what’s a poor student to do? We went ahead and crunched some numbers for you.
Pay for College with Real Estate: Cuz It's Frickin' Expensive!
Do you know how much college costs these days? It’s crazy expensive!
Most bachelor’s degrees are about 120 credits units. Tuition costs, on average, $500 per credit unit. Remember that these numbers can go up or down depending on the college you selected and the location--we selected an average number as an example.
So $500X120=$60,000-- and that’s just the cost of tuition.
You’ll also want to factor books, room and board, groceries, and other expenses into the mix and you’re looking at a number that’s getting preeeetttty darn close to six figures.
Yep, remember all those scholarships you could have gotten? Let’s go ahead and mourn for those just one more time.
Ok, now it’s time to do some work. Real estate is where it’s at.
So, here’s what you’re going to do. In order to pay off college debt quickly and easily, you are going to consider purchasing a condo in the area where you want to go to college. You will put down a down payment, get some roommates to fill the place, and will pay the monthly mortgage with their rent payments.
You will pay off college debt by either selling the condo or refinancing it once you’ve graduated.
Boom! College paid for.
OK, there's a bit more to the story.
If you buy a 3 bedroom 2 bath condo for $200,000 and put down $40,000 as a down payment, your monthly mortgage including taxes would be about $900 per month for a 30-year fixed rate loan.
Let’s say you had 2 renters in the unit, each paying $600/month, you would make $1200 total.
Once you pay the mortgage payment, you would still have several hundred dollars left over each month which you could add to the mortgage payment if you want to pay down your debt even more or you could start a savings account that will be used in case of an emergency, like if the heater breaks or the shower gets a leak that has to be fixed.
You could decide to live in the condo for some or all of your time in college or you could live at home or nearby in order to maximize your rental profits.
If you decide to sell the house after you’re done with college or let’s just say you decide to sell 5 years after purchasing it, with a 5% appreciation on your property, your $200,000 investment will be up around $255,000.
If you could sell the property for that amount, you get back your original investment of $40,000 and still have a sizeable amount left to pay off ALL your student loan debt.
Condos are always on trend
If you’ve never bought real estate before, this will all be new to you. Whether you are making this investment for yourself or to pay for your children’s college, you’ll want to familiarize yourself with the real estate buying process.
When you go look at properties, make sure to look for one that has 2-3 bedrooms and is in decent condition. Or, if you are handy, you can pick a place that needs a little TLC and work on it in between classes.
Also look into the amenities included in the unit, such as a washer and dryer, dishwasher, and patio or storage space.
It would be a good idea to get a second opinion from someone other than the real estate agent when choosing a condo since some agents are only concerned about the sale. You don’t want to get stuck with a place that has a lot of problems and you don’t want to pay too much for a place.
Here’s why buying a condo is the smartest way to go when purchasing a rental property; condos are a great way to bring in multiple streams of income for very little work. Sure, you will have to manage the condo (fix a few clogged toilets, turn the heat on, do routine maintenance work) but it’s a small price to pay for the return on investment.
If you buy a condo that appreciates a little bit every year (meaning the property is gaining value over time), you’ll be able to sell for more than you bought it for and you’ll also be able to raise the rent.
Buying an investment property is a wise way to pay for college using real estate, and it can teach you some life skills about money management and investing too.
It may not be the most traditional route, but paying for college using real estate is definitely one of the smartest.