Pay for child's med school or invest money?

[applesandangels]

So next year my child will start med school which will cost about $100k/year. I have about $150k saved up. Do I use that to pay for first year of med school or do I invest it? I was thinking of buying an investment property to generate some cash flow which I could use to pay some of the tuition. Thoughts?

NW: $2.3 mil. Plan to retire in 10 years. Projected NW in 10 years will be about $3.5 mil - $4 mil.

 

[baruch_atah]

@applesandangels Since you are open to an investment property you could do what my brother did for his son while he was in vet school. He bought a house close to campus that he allowed his son to live in rent-free in exchange for “managing” the investment property (i.e. finding rent-paying roommates and keeping the yard mowed). His son could pay for school in the usual ways (scholarships and student loans) but it was a much easier lift without housing costs to worry about.

 

[tomryan]

@baruch_atah This is what my parents did and it was life changing for my time in law school. They purchased a town home in my second year of undergrad, and I lived rent free until I finished law school, so long as I found suitable roommates and made sure the house was in order. I took loans for law school, and left with maybe 40% of the debt that my friends had, since we live in a HCOL city where rent for a studio is $2,000/month. My debt is incredibly manageable at less than $50k, but my friends who had to rent are upwards of $125k.

They sold the house after I passed the bar exam and made an enormous profit, because they purchased the house for $110k maybe 6 years ago, and sold it for $245k.

 

[evieoooo]

@tomryan Did it make you feel weird to be your roommates' landlord? This isn't meant to be judgy but I would have been very uncomfy if I had been in your shoes. Two of my roommates absolutely would not have had the option to have their parents subsidize their housing, and I don't know if I would have been able to charge them rent knowing I'm benefiting from the equity they pay for over time. I'm not anti-landlord as a rule; I know renting has its place and that good landlords do earn their equity. It would just feel too personal to have it be via my roommates/friends for me, I think.

 

[tomryan]

@evieoooo It was a little weird at first, but my roommates had been friends/co-workers for a while, and the rent was incredibly cheap compared to similar housing in my area. It worked pretty well in the end. My family only owned the one property, so we weren’t serial landlords. I think it worked out for everyone well—we all had significantly less debt than we would have had we lived somewhere else.

 

[mercy743]

@baruch_atah This is a good option.

You can also help with the loans if you wish to at a later date.

The greatest gift you can give to your kids is having enough money to take care of yourself through your death without being a burden to them.

The second is an education.

The third is support with purchasing their first house/ low cost accommodation do they can save and pay off their debts.

With this plan you hit all three.

 

[resjudicata]

@mercy743 ya if you can get a property close to the school. I live in no where USA and have a tiny no name no one care about college. Good luck buying a rental there that isn't a SERIOUS investment.

 

[resjudicata]

They have $150k for a down payment

 

[theretrogamerny]

@baruch_atah This is what my friends parents did for vet school as well. BEST decision ever. I highly recommend it. And if he gets roommates, he can use that money for school. I don’t see a point in draining most of your savings to only cover 1/4 of grad school. If that. He’ll need to take out loans regardless. I vote the house!

 

[tammy1ed2]

@baruch_atah My parents did this as well! The sold the duplex for profit after my younger sister graduated with her masters and split the proceeds 3 ways (for their 3 kids) to pay for our loans. My oldest sister had already paid hers off but they still gave it to her. It was a nice surprise!

 

[james75]

@baruch_atah I lived in a house like this when I was in undergrad. Our landlord originally bought the place for her son and friends to live in while they were in school, then once he graduated they decided to just keep renting it out to students. Works out great because as long as the school is running there'll always be new tenants available to rent to.

 

[keohay]

@james75 This works if the students don't trash the place, which is less likely if it's your own child living there with friends. More risky if you don't have a close connection with the tenants.

 

[ryan19842003]

@keohay It’s still profitable if they trash it, your margin just needs to be high enough.

 

[rosecloud]

@baruch_atah Rich people options.

 

[resjudicata]

@rosecloud That’s why poor people often don’t get to go to med school, among other reasons. The economy isn’t fair, but that doesn’t mean you should be dismissive to good advice just because it doesn’t apply to you.

 

[rosecloud]

@resjudicata Seriously, how many people buy a property for their kids to live in during college? Less than 5%? 2%? It’s a privilege to be able to do something like that.

 

[richmiz]

@rosecloud But, as someone who has yet to build themselves a family, and any wealth for that matter, this is incredible advice. Should I choose to have a family, I would love to support them to some level but also let them make their own way and learn to be financially responsible from early on. Knowing that people do this, and that I have 20+ years for this attempt feels empowering.

 

[resjudicata]

@rosecloud How many people have $150,000 in savings? More than 40% of Americans have less than $500 in their savings account.

Of course it is a privilege but so is college, so is medical school, so is anything besides being flat broke.

 

[samuel_north1]

@resjudicata Disagree that savings is a privilege. Spending less than you earn and saving (no matter the amount) is a choice and takes discipline.

 

[quinita]

@rosecloud

how many people buy a property for their kids to live in during college?

Think of it as an investment: you get better than average growth (from leverage) and close to guaranteed rental income (room rentals are not tenancy protected). Houses in university towns usually keep their value due to student population growth so there's no lack of demand when you sell it to the next sucker.