Do you have kids or maybe even grand kids? Do you plan to help them with tuition for college? Or help them financially in some way? If so what is your game plan?
My wife and I have 3 young kids and we both want to help them financially in some way. Granted they will need to do their part as well (have some skin in the game). If they decide to attend college, a trade school, start a business, or want to invest in real estate themselves. We want to be able to help them achieve those goals and dreams.
When we had our oldest child a little over 6 years ago we opened up a My529.org savings/investment account to start saving for college. We have since done this for each of our children and contribute to it on a monthly basis. The question that kept coming to my mind was what if they don’t go to college how can we provide some financial assistance. My thoughts kept coming back to real estate. So I came up with a 3 year plan that would help us to acquire 3-6 units. My goal is to start this plan in 2 years once I have fully vetted and built a solid process in my out of state area that I am investing in.
This strategy would follow the BRRRR strategy (Buy- Rehab- Rent- Refi- Repeat)
Each year either buy 1 SFH (single family home) or 1 duplex, Rehab it, Rent it, and Refi and use that initial down payment to do it again.
Sample numbers on a SFH:
Purchase – $55,000
Down Payment – $13,750
Rehab- $15,000
Total Cost- $28,750
- this doesn’t include holding costs
- you can get financing that for 10-15% down they will cover the purchase price and rehab. A company that does this is Lima One Capital.
ARV (After Repair Value) – $95,000 (get $30,000 back on the refinance)
Gross rents- $1,100
- PITI- $500
- PM-$100
- Vacancy- $50
- Utilities- $50
- Maint/ Capex- $100
Profit – $300 / $3,600
*if you did a duplex basically double these numbers
So each month we would be making $300 a month and $3,600 annually. After three years we would be making $900 a month and $10,800 annually.
Here is what 10 years would look like once we bought our first investment for kids funds.
Year 1 – $3,600 (1 unit)
Year 2 – $10,800 (2 units+ year 1 income)
Year 3- $21,600 (3 units + year 2 income)
Year 4- $32,400 (3 units + year 3 income)
Year 5- $43,200 (3 units + year 4 income)
Year 6- $54,000 (3 units + year 5 income)
Year 7- $64,800 (3 units + year 6 income)
Year 8- $75,600 (3 units + year 7 income)
Year 9- $86,400 (3 units + year 8 income)
Year 10- $97,200 (3 units + year 9 income)
So by the time my oldest is 18-19 years old we will have nearly 100k in our kids savings account. Who couldn’t use an extra 100k to help their kids. On top of that you still have three assets that continue to produce $10,800 annually for if not more (do to increased rents over time). This could help pay for weddings, etc.
I hope this helps or at least gets those creative juices flowing.
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