Post image for More than another rental property…it’s his college fund!

More than another rental property…it’s his college fund!

by Aisha DaCosta on March 24, 2012

On March 8, 2012 my son turned eight and now we are exactly ten years out from high school graduation and college! The pressure is definitely on to kick investing into full gear for his college education. There are tons of options: 529 College Savings & Prepaid Plans, UGMA & UTMA Custodial Accounts, Coverdell Education Savings Account (ESA), Savings Accounts, Bonds, Brokerage Accounts, Roth IRAs, Whole life insurance and the list goes on…

They all have their pros and cons. I’ve started and stopped several of them before settling on my investment strategy for his education…rental property! Yup, that’s right I am using rental property to fund my son’s education. A couple of weeks ago I did a guest post on ChasingYourFreedom.com about my plan to use 10 ugly houses as the basis of my financial freedom success plan [Check out my Guest Post]. One of those houses is also part of my plan to fund my son’s scholastic and financial education.

Here is my plan…

I purchased the house for $9,200 and the renovations will be roughly $10,000. The roof is five years old, it was re-decked and covered with 25-year shingles in 2007. I need to make some cosmetic repairs (flooring, paint, landscape, sheet rock), re-wire the house and add a new heating, ventilation and air conditioning (HVAC) unit. But all the big headaches will be relatively new (roof and plumbing) if not brand new systems (electrical and HVAC). The tax assessment is $52,990 and the projected rent is $750 per month. [Note: My general contractor is the greatest! He gives me rock-bottom deals on pricing. We have been doing business together since 2008. These rehab figures reflect my special pricing. :-)]

The Numbers:

Income:  

Gross rental income is $9,000 per year

Expenses:   

Estimated repair expense $900 per year

Property Management fees $750 per year

Property Taxes $800 per year

Property Insurance $600 per year

Vacancy Estimate @6% (Lost Rent) $540 per year

Cash Flow:

Income ($9,000) minus Expenses ($3,590) = $5,410 per year

Projected 10-year Savings: $54,100

Don’t forget the ability to access at least 65% of appraisal value of the home and the continued income generation from the property to help subsidize his income while in college and beyond.

My Strategy: This house is just Phase 1 of my plan. Anyone that knows me, knows that I love duplication of effort and can be a bit insatiable. Phase 2 is of course a similar house with similar numbers purchased at year four (after the accrual of approx. $20,000)

With two houses pulling the college investment plan instead of $5,410 at the end of year five we now have $10,820 that will be tucked away for the next six years. Yielding approximately $64,920 instead of $54,100.

Again these numbers are based on utilization of the home as a single-family rental. It doesn’t take into account the possibility of using the same spaces as an assisted living facility for aging Baby Boomers or even a group home for at-risk youths. The possibilities are only limited by your imagination.

Asset Protection:

In Episode 5 of Freedom Cipher, I had the opportunity to talk with Rich Dad Advisor Garrett Sutton about asset protection and the advantages of buying property in a limited liability corporation (LLC) [5:46 - 8:03]; the impact of state LLC laws on asset protection [15:52 - 17:26]; and this very strategy of using real estate to pay for your child’s education [19:42 - 20:25].

Freedom Cipher Episode 5: Meet Rich Dad Advisor Garrett Sutton from Aisha DaCosta on Vimeo.

So, tell me what you think…

Unconventional? YES! It definitely is!

Risky? YES! But, not much more than mutual funds and/or stocks. Maybe even less risky.

Will it work? Maybe.

Can it work? ABSOLUTELY!

Flexible? Oh yeah! Rent it…Sell it…Flip it…Leverage the Equity…Now that is one heck of a college investment plan!

Before you go, let’s take a quick (5 min) look inside a $10,000 house in Macon, GA

Ugly House: A look inside $10K house (Pre-rehab) from Aisha DaCosta on Vimeo.

Leave your feedback below and let me know your thoughts!

I am an investor: I invest in people!

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{ 15 comments… read them below or add one }

Ray March 24, 2012 at 9:27 am

And so the student becomes the teacher. I’m proud of you Aisha for chasing your dreams and for having the heart to teach others the same. People like you are rare. Keep shining Mrs. Lady your light helps others through the darkness.

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Aisha DaCosta March 24, 2012 at 10:03 am

Ray,

Thank you for taking the time out those many years ago to have lunch with me and laying out the many possibilities of investing in lower income houses. You have changed my life! Each one, teach one! :-)

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Jermaine Taylor March 24, 2012 at 12:11 pm

Aisha,
You doing big things & an inspiration for so many. Love the post and you have definitely giving me a new perspective on alternative methods of funding my children’s college fund. Keep doing your thing Mama!!!!

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Aisha DaCosta March 24, 2012 at 12:50 pm

Thanks JT! Real Estate is my new Motrin 800…it cures everything! :-)

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That Philly Wholesaler Chick March 24, 2012 at 9:18 pm

Phenomenal plan to fund your son’s college education!

I applaud you Aisha!

Your system and strategy for acquiring investment properties to create financial freedom, in addition to using them as a financial tool to fund your son’s college education, should be empowering to any one that reads it. The take-away? “It’s possible for me, too!”

Iman

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Aisha DaCosta March 24, 2012 at 9:43 pm

Iman, thank you! It is most definitely possible for you too. My 10 ugly houses are the foundation of a multi-tiered approach to financial freedom. They provide what I like to call “stay at home money”, money that I don’t have to leave my house to get. With a foundation built on money that automatically comes into my account, the sky is the limit for what I do to make money by leaving the house.

I took $20,000 and invested it into a ugly house that will produce income, savings, and equity to pay for my son’s scholastic education. My strategy will also provide for his financial education. That $20,000 is well worth the investment.

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That Philly Wholesaler Chick March 25, 2012 at 8:04 am

Although I was speaking in terms of the collective “me, too,” you’re absolutely correct. In fact, I was advised by an unofficial mentor to do just that – put aside 20K for my first rehab project. That, coupled with your strategy that you outlined here, and in a previous post, definitely makes for a win-win situation!:)

Thanks for all that you do!

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Autumn April 1, 2012 at 10:20 pm

What a great and inspirational plan! So happy to have you as a friend!

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Aisha DaCosta April 2, 2012 at 3:39 am

Thanks Autumn! Glad to have you as a friend as well!

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David B. April 21, 2012 at 8:27 pm

Aisha: I read your post on chasingyourfreedom.com and was inspired beyond measure. This post has taken me into overdrive #literally. I needed that spark to ignite the flame, and this did it for me. Thanks for being a light!!!

Reply

Aisha DaCosta April 21, 2012 at 8:50 pm

Wow, David! I am humbled by your comment and excited that I was able to a light. I visited your blog and would like to invite you to participate in my latest project called Blueprint: A Letter to Our Sons (I’ll send you an email)…let’s also connect on Facebook at http://www.facebook.com/aishadacosta Thanks again for stopping by and connecting with me.

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David B April 21, 2012 at 9:29 pm

It is my pleasure to connect. What’s very interesting is just yesterday, I finalized my book entitled “The Blueprint”. What’s even more interesting is that I am in the process of writing a book to young men entitled “When I Became a Man”. I said all of that to say that in regards to “Blueprint: A Letter to Our Sons”, I WANT IN!!!
David B recently posted…He Just Won’t Talk To MeMy Profile

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Aisha DaCosta April 21, 2012 at 9:36 pm

That is AMAZING! I will definitely e-mail you the details. Everything happens for a reason! :-)

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Jennifer April 24, 2012 at 8:21 pm

Hi Aisha,
This is awesome! It is actually a slide I teach on in my Four Keys to Financial Success workshop! I show attendees how to get the downpayment they need to buy their houses and use the exact example of 10 houses in 10 years as a college fund! You’re on target! Thanks for coming to my book signing! Please stay in touch!

Jennifer

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Aisha DaCosta April 24, 2012 at 8:25 pm

Hi Jennifer. Thanks for stopping by. It was a pleasure meeting you at the car wash (funny how things happen like that) and getting the invite to your book signing. You shared a lot of great information on Saturday. I will stay in touch. I am actually going to email you about my latest project. You might be interested in it. Take care and God bless!

Aisha

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