Whether you're planning to send your children or grandchildren to college or whether you just want to have some extra cash or income when retirement comes, many people right here in Northern Kentucky are rental property owners.
The concept around using investment property as a vehicle to pay for college (or anything else) is simple. If you were to buy a $100,000 house today as a non-owner occupied rental, you would have to put $20,000 as a down payment. A 15 year mortgage payment with interest, taxes, and insurance would be about $840 and a 30 year mortgage would be about $625 per month.
In most areas of NKY a 3 bedroom 2 bath home can rent for $1000-1200 per month. Assuming the renter maintains the lawn responsibilities and pays their own electric/gas/water/sanitation (they usually do), your cash flow is somewhere between $160-575 per month in this example.
Many clients always shy away from owning rental property because "I don't want to be a landlord" or "I don't want to get the calls". These concerns are completely understandable. Factor in 10% if you would rather hire someone to manage the property for you (screening tenants, collecting money, fix toilets, etc). This still leaves you breaking even or making a small cash profit each month. The beauty is that after 15 years, the home is paid for and your initial investment of $20,000 is now worth $125,000 if it has appreciated in value over the length of time you've owned it.
Next you sell the home and cash out or continue to rent it and use the cash flow to fund college or supplement your income.
Trust me when I say the concept is simple. Getting started and the details can be a bit more complicated. I am currently using this strategy to build wealth and plan for the future. If you're interested in learning more, feel free to contact me and we can discuss putting a plan together to build your real estate investing portfolio.
Books to consider:
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