| Don't use a home equity loan to pay for your child's | | | | commercial rooming house without insuring such a use |
| college education. | | | | and the insurance company could legally deny |
| Use a home equity loan to buy a house for your child | | | | payment of the claim. |
| to live in and rent out while he is at school! The house | | | | Just try to get the parents of the other students to |
| will pay your child's college costs. | | | | pay the year's rent in a lump sum, just as they would |
| This method will work if the college he/she is attending | | | | with the school's housing. |
| has private student housing. | | | | The rents from the other bedrooms should more than |
| What you will do is you buy a house or condo in the | | | | cover the mortgage and operating expenses of the |
| immediate vicinity of the school with at least 3 and | | | | house and perhaps provide Junior with a little tax |
| preferably 4 bedrooms; 2 bath rooms is ideal. | | | | deductible spending money, as management fees are |
| A 2 family house is even better as it has 2 bath | | | | tax deductible; in addition to write offs for the |
| rooms and 2 kitchens. | | | | mortgage interest, insurance costs and real estate |
| The idea of course is to have your child occupy one | | | | taxes. |
| bedroom and rent out the others to other students. | | | | You can also deduct your percentage share of the |
| Your child will be the official property manager. His or | | | | depreciation. |
| her name should be on the deed to the house as well. | | | | Taking furniture, such as a TV set or chairs to the |
| This will also give your child a greater sense of | | | | house is also a business expense. |
| responsibility, which is a good thing. | | | | You would also have the right as a property owner, |
| The fact that your child's name is on the deed may | | | | twice during the year, to visit your investment, which |
| qualify you for first time home buyer status as well, | | | | just happened to contain Junior! |
| plus it will be a benefit as far as down payment and | | | | The property appreciation during the 4 (5-6?) years |
| interest rates go. | | | | that Junior is in school, combined with the cash flow |
| Speaking of down payments, instead of a home equity | | | | and tax deductions, should pay for his entire college |
| loan, a loan from your IRA or retirement plan as the | | | | tuition costs! |
| source of the down payment is not such a bad idea, | | | | You could either reimburse yourself from the sale of |
| as you will see later. | | | | the property or, if feasible, use the cash flow from the |
| Actually, you cannot borrow from your IRA, but you | | | | continued rental of the property after he graduates to |
| are allowed to withdraw funds toward a down | | | | pay off the loans you took out to finance your child's |
| payment without penalty, even if you are under 59 | | | | education. |
| ½ years of age, although you will still have to | | | | This way, the house can finance Junior's education |
| pay taxes on the amount withdrawn. | | | | And help finance your retirement, especially if it were |
| If you have a 401(K), you should be able to borrow the | | | | 10-15 years away. |
| down payment from it and receive up to 5 years to | | | | If the distance makes it infeasible to continue to rent |
| repay. Perhaps your company's pension also has a | | | | the property, consider selling it on a wrap-around |
| provision to let you borrow from it to buy a house. | | | | mortgage, (ask your realtor) whereby the new |
| You can furnish the house in early American furniture | | | | owner's payments will give you a profit after deducting |
| (1960's!), the cost of which will be tax deductible. | | | | the cost of your mortgage payments for the next |
| Be careful Not to get separate leases from the other | | | | umpteen years. |
| students. While this may sound strange, the reason is | | | | Of course, there is no reason you could not use this |
| that if there should be some type of insurance claim, | | | | strategy with 2 or more houses, if you think about it. It |
| fire, water, etc. the presence of the leases would be | | | | could be the launch of Junior Trump's real estate |
| evidence that you were using the house as a | | | | empire! |