Want to Save for College Education?

Consider Buying a Condo!

There are many ways to save for college expenses, but have you ever considered purchasing real estate instead of investing in a traditional college savings account?

If you have a child or grandchild that is born in 2022, it is estimated that you will need about $227,000 for a public 4-year in-state college education in 2040. Assuming a 4% rate of return, you would need to save $725 per month for 18 years to fund your child or grandchild’s education – that is $156,600 out of your pocket. 

  1. Save $725 per month for 18 years = $156,000 out-of-pocket
  2. At a 4% rate of return
  3. Total savings after 18 years = $229,000

Our advice? Buy a condo instead.

Buy a $300,000 condo with a 5% down payment – that is a one-time investment of $15,000.  Obtain a 15-year mortgage and get a tenant that pays 100% of your cost of owning that condo. In 15 years, the mortgage will be zero and your equity will be $300,000 (without any market appreciation).  If we were to assume a 2% appreciation, then the value of that condo after 18 years would be $428,000. Sell the condo when your child/grandchild attends college and you will net $406,000 (after closing costs). $406,000 – all from a $15,000 investment made back when your child or grandchild was born.

  1. Buy a $300,000 condo with a $15,000 out-of-pocket down payment on a 15-year mortgage
  2. Rent it for 18 years, covering 100% of the monthly costs
  3. After 18 years and a 2% market appreciation, the value of the condo is $428,000
  4. Sell it when your child/grandchild attends college, and you net $406,000
  5. Net from sale $406,000 minus the cost of a 4-year public college education ($227,000) = a $179,000 return on your investment

Click Here to review the condos currently for sale under $300,000 in the Central Jersey and South Jersey areas.

To find out more about investing in real estate to pay for your child or grandchild’s college education, contact an ERA Central Trusted Advisor today!