When you start them early enough, your investments can perform shocking feats of strength. They can even keep pace with the runaway cost of college tuition—which has more than doubled since 2000. The average cost of private college tuition and fees has reached $38,768, according to the Education Data Initiative, and you can expect that to keep skyrocketing between now and when your little one reaches college age.
Fortunately, real estate can help. Try these creative approaches to paying for your kids’ college education so you can stop worrying and start getting excited about your children’s university years.
1. Let Your Tenants Pay for Tuition
Imagine that the year your child is born, you buy a rental property for $360,000 and put down 20% on it. You borrow the rest ($300,000) with a 30-year mortgage at 6% interest.
Here’s how the next 18 years of property equity look:
After 18 years, you now have $554,870 in equity. That’s a tidy sum to pay for tuition, hopefully with plenty left over to go toward your retirement.
Your tenants have paid down your mortgage balance even as your property has appreciated in value. I assumed a 4% annual appreciation rate. For context, U.S. home prices appreciated an average of 4.8% annually from 1987-2023.
Oh, and that says nothing of your cash flow. Your rents have risen alongside inflation, even as your mortgage payments remained fixed. Your rental property should be paying a princely sum each month by now. It probably cash flows so well that you won’t want to sell or refinance it.
If you want to get even more aggressive with paying down your loan balance, you could buy with a 15-year mortgage. Just beware that your cash flow will take a hit. Here’s that chart, too:
2. BRRRR: One Down Payment to Rule Them All
If you wanted to get more aggressive with your rental strategy, you could follow the BRRRR strategy (buy, renovate, rent, refinance, repeat). The idea is that you…