I Can't Complain, My Tenant Is Putting My Kids Through College!

I Can't Complain, My Tenant Is Putting My Kids Through College!

It was 1981 and my second daughter was just born.  I now had responsibilities above and beyond the day to day cares.  I had two kids that would someday need to complete four years of college.  How would I ever be able to save enough money to pay for this? I looked at several options.  I could save my money.  I could try my luck in the stock market. I could buy an annuity or mutual funds. In any event, I was going to need $15,000 to $30,000 per child, per year, for at least four years of school.  

I had been selling real estate for about three years at this time.  I knew that real estate was a good, long term investment and we had just gone through a down turn in the real estate market.  Now would be the time to buy a long term real estate investment that could be used to help pay for my kids' college education. 

Would I buy a condo, house, duplex, triplex or multiple units?   The answer was easy.  I had very little money.  I needed to find something that I could buy with very little down and would come close to carrying itself with the rents.

Shortly after I started to look, I came across a one bedroom condo in Lake Forest, California.  The real estate market had caused prices to decline and the owners of this condo now had no equity.  As a matter of fact, they were in a negative equity position. They owed more on the property than it was worth.  Because of their position, they were willing to sell the property on a contract of sale, just to get out of the property. What this meant to me was that I could buy the property with four or five thousand dollars down and not have to qualify with a lender. The benefit to the seller was that they could sell the property and move on to bigger and better things. The benefit to me was that I could buy a rental property with less than 10% down. It was a win win situation. Yes, there were risks, but we were both willing to take them.

The rents on the property almost covered the expenses of the property.  After the tax benefits were figured into the equation, it was a real break even. I bought the property.  Within a month, the neighbor upstairs from the Lake Forest condo called me to ask if I would like to buy her condo the same way.   Having two daughters that would need to go to college, I said yes.

I purchased both properties on a land contract and held them for about five years.  At that time I refinanced the properties on fifteen year loans.  With the drop in interest rates, the rents still covered the expenses.

There have been times when I wondered why I have tenants.  Then I remind myself that I can't be mad at my tenants, they are putting my kids through college.   Not only are the tenants putting my kids through college, but I have enjoyed the tax benefits of rental property.   This has saved me thousands of dollars over the years.  With the increase in rents over the last few years, I was able to accelerate my payments and pay off both of my condos. 

In 2001 my oldest daughter graduated from USC with no student loans.  In 2004 my youngest daughter graduated from Westmont College with no student loans.  Both of these colleges were $30,000+ per year. I must thank all of my tenants for their support because they put my kids through college.

Oh, there is one other side benefit to this plan.  When my daughters graduated from college I gave them the keys to their first condo.  Their only payment will be to pay off the loan that helped put them through school.