Tuition costs are increasing, housing costs are increasing, it seems like all costs to students are increasing these days. Students can afford cost increases less than any other demographic in Canada. Because of this, both parents and students are looking for new ways to offset the costs of education.

Student loans can be used to defer these costs to some extent, but must be repaid after graduation. It’s hard to climb the corporate ladder or get ahead in life when you’re $ 30,000 in debt before you find your first job!

Scholarships, grants, and scholarships are another great source of funding for a student. However, the amount of money available is shrinking and the competition for this money is getting tougher every year.

The average student, with a degree of more than 4 years, pays more than $ 16,000 in tuition and books. The home costs approximately $ 38,000 for a 4-year title. This is based on a rent of $ 800 per month for 48 months.

This means that the total cost of education for a student exceeds $ 54,000 before paying for any clothing, food, or recreation expenses. Since the average student does not qualify for more than $ 9000 / year in student loans, this means that the average student needs to find more than $ 18,000 during their 4-year educational career in order to go to school. Not to mention the cost of food and clothing.

So how can a student get ahead in life, avoid massive student loans, and still get an education?

Many parents have turned to real estate as a solution in search of a solution. Let me explain what they are doing …

When their first child enrolls in college, parents buy a small house with easy access to college. The more bedrooms the better! This opens up many possibilities for both parents and students.

First, the property will likely appreciate, presenting the parents with an equity that can then be used to pay off student loans or your own personal use.

Second, the rent that the student would have paid to the owner or the dormitory is being used to pay the mortgage, creating more equity in the property.

Third, being a rental property, the property tax benefits are fabulous. Any interest paid on the mortgage is a cancellation. Maintenance and improvements, as well as taxes and often utilities, are expenses that can be written off.

Fourth, there is the possibility of additional tenants. Suppose you bought a 3-bedroom bungalow for approximately $ 150,000. The cost of the mortgage would be approximately $ 900; based on a 25-year 5.5% mortgage with a 5% down payment. That’s just $ 100 more than renting a typical 1-bedroom near the University of Alberta right now.

Your child finds 2 roommates with whom to share the expenses. Each of them pays you $ 600 per month; renters are saving $ 200 per month on the cost of renting an apartment. A good deal for them!

Her total household income is $ 1,200 per month. Your child lives free and earns $ 300 per month, which can go toward living expenses and spending money. Now your child can go to school, not work, and focus on studying.

What if you finished the basement with 2 additional bedrooms? Basically that would double your income or allow you to “pay off” $ 1500 per month. Your child receives $ 500 a month for living and expenses, and there is an additional $ 12,000 a year ($ 100 a month) to pay for tuition, books, and other college expenses.

Let’s look at this again, using 2 families as examples. The Smiths and the Joneses.

The Smiths send their son, Steve, to college for 4 years. He rents an apartment in the residence for $ 800 a month while he goes to school. Its tuition, including books, is about $ 4,000. Expenses for money, clothing, and food are approximately $ 500 per month. So Steve’s yearly costs are roughly $ 20,000 a year.

Student loans and scholarships (assuming Scott qualifies) cover about half of this, leaving him and his parents to cover the rest. Scott has to get a part-time job to pay for part of it and work full time in the summers to help out.

The Smiths fight, use their savings and hard work to get through the tough 4 years. When Scott graduates, he will have to start paying between $ 30,000 and $ 35,000 in student loans. You will make that payment for the next 10 years …

Now let’s take a look at the Joneses.

The Joneses buy a house near the school for their daughter Sally. They make a 5% ($ 7,500) down payment on a $ 150,000 house. It has 3 + 2 bedrooms. Her daughter lives in 1 bedroom and manages the rest of the tenants in exchange for a free rent and a monthly allowance of $ 500 to cover her living expenses. Each of the 4 additional bedrooms rents for $ 600 per month, including utilities and laundry. A great deal for ANY student.

Each month, Sally collects rent from her 4 roommates, totaling $ 2,400. She keeps her $ 500 and deposits the remainder in a bank account dedicated to the property. The mortgage and taxes are paid every month from that same account. Together these cost $ 1,100 ($ 900 for the mortgage and $ 200 for the taxes). That leaves an end-of-month profit of $ 800 for the property. That money simply stays in the account in case of emergencies, repairs, or other unforeseen expenses.

Remember, mortgage taxes and interest are year-end tax write-offs for Mr. and Mrs. Jones.

At the end of the first year, September through December, there is $ 3,200 in cash in the bank account, or about 50% of the down payment. Sally is happy that they can use that money to pay for Sally’s second semester tuition without any student loans, not to mention that she has not needed to work while studying.

Mr. and Mrs. Jones is happy about the big tax deductions they get from the property, plus Sally has no excuses for not getting good grades.

During the summer, the house pays Sally to take some extracurricular courses, or maybe take a trip. Maybe he even walks around the yard and does nothing. You have options because you don’t have to work.

In early September of next year (beginning of Sally’s sophomore year in college), the Joneses have raised $ 6,400 in income from the property. Sally’s tuition for the next semester is paid, as are her books, and she lives free. The cycle continues for the rest of his time in college.

At the end of the 4 years, they have obtained more than $ 20,000 in cash after all expenses. They have also been paying off the mortgage and the property has likely increased in value.

Sally hasn’t worked a single day at school, has no student loans, and is fresh and ready for the workforce. You have no debt, so you quickly move forward in life.

Sally graduated with honors because she could focus on her studies and not worry about earning money for school. Jones’ Total Investment: $ 7,500 in initial deposit plus Sally’s first semester tuition of approx. $ 2000.

Total benefits; $ 35,000 in cash and principal. Is it any wonder why we are all trying to keep up with the Joneses?

But it doesn’t stop there …

The Joneses now have to decide what to do with the property. Sell ​​it? Safe. They would make a nice profit on the house. Remember, the mortgage has been paid off during the last 4 years, as well as the increases in home values ​​during those 4 years.

But let’s say they keep the house and rent the entire property to the students. Your total income could be as high as $ 3,000 per month, or $ 1,900 after mortgages and taxes. And that’s assuming the rental rate hasn’t gone up in the 4 years …

If you were one of the Joneses, you could go to http://www.mercedes-benz.ca, choose his and her Mercedes convertibles, and not pay a penny for them. The leases would be covered each month for the $ 1900 in revenue.

For being such good parents and paying for your child’s full education, you deserve a pair of convertibles, don’t you?

All figures are approximate and are provided as examples only. Some properties may not work as well, while others may work better. To select a good investment property, contact a real estate professional like John Carle. We do not guarantee good grades for your children in school.