Always Ask for Sue and Ken: Let Your Tenants Send Your Kids to College

Most people have lots of things to save for but not always enough discretionary income after family essentials have been met.

A relatively small investment in a rental home can control a good home that will easily rent, generate positive cash flows and pay for itself. The borrowed funds create leverage that earn a return on the total value of the home and not just the amount of cash you have invested.

The strategy is simple.

- Find a slightly below average priced home that will rent well.
It will appeal to a larger group of people while it's rented and when it's
ready to be sold.

- Rent the home and maintain its condition over the years.
As the loan amortizes and the value increases, the equity will grow.
When your student is ready to start college, you'll actually have several
options.

- You can sell the property
Pay the tax on the gain at the reduced capital gains rate and fund the
education.

- Refinance and take the proceeds to pay for the tuition.
This would allow you to continue to own the asset but would free your
equity and under current tax laws is a non-taxable event.

Regardless of whether you're trying to plan for your children's education or your own retirement, rental property offers many solid investment opportunities. Contact us if you want more information.

Sue Lawrence and Ken McCormick can be reached at 806-355-9601. Prudential, Ada REALTORS is an independently owned and operated member of Prudential Real Estate Affiliates, Inc., a Prudential company, an Equal Housing Opportunity.

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