College is expensive, and a big chunk of that expense comes in the form of room and board. But if you get creative, you can mitigate that expense. Forbes recently published an article on a genius way to provide your student’s own room and board, and make a little extra money on top. Here’s how.
First, purchase a rental property near your student’s school that could accommodate him or her, as well as a few roommates. Next, hire your student to manage the property. He or she can use the income to pay for tuition with little or no tax, and the roommates will help cover the mortgage with their rent payments.
Once your student is done with school, you can either keep the property as a rental or use it as a retirement home, or you can do a 1031 exchange, deferring the tax on the capital gain so long as you buy another “like-kind” property, perhaps in a different location.
Just be sure that your student is up for the challenges of being a landlord. You may need to educate him or her on how to screen potential tenants/roommates, as well as how to do a credit check, sign agreements, collect rent, and keep up maintenance.
If you’re interested in using this strategy and have questions about how it could work in your own situation, contact us.