I’ll lead off with the questions and give the background below
Is either one of my properties an "investment property"
1b. Which one is the investment?
How do I solve this without shafting myself for aid AND without lying to the govt.
I received an inheritance and used it for a down payment on a short sale (65k),
My old home is a condo unit ( tax assessed at 50k, but the best offer I’ve got is 35k…I own it free and clear…)
I live extremely modestly, I’m honestly not able to afford both the new home and the condo… I didn’t break 30K last year for AGI. I’m putting my wife through school.
No, I don’t know how I got approved for the mortgage either… other than my credit score was over 800.
But all I plan to do with the money I get from the condo selling is pay down the mortgage I have on my new home. Had I been able to do that already, this would be moot.
Is either my new home (which I’ve lived in for 4 months of 2014) or my former primary residence (and HR Block said since I was there 8 months that IS my primary residence for 2014) counted as an investment property?
If the condo was my primary residence, does that make the new home an investment property? Its net worth is only 10k if thats the case… but if the condo is counted then they could probably say I am sitting on 50k…
If you currently own two homes, the one you live in is your primary residence. That does not get reported anywhere on the FAFSA. The second home…you report the equity in that second home as an asset on your FAFSA.
If your college requires the Profile, it will ask for the equity in your primary residence, and for the equity in your second home.
It would be smart to live in the one that has the most equity…then that one would be your primary residence.
Assessed value is not necessarily what it’s worth, which is what you need to know. Have you had a real estate agent or professional appraiser give you a market estimate?
Have you started the FAFSA yet? 30k AGI…Could that income be low enough for asset exclusion (being able to skip assets questions)? Or are more dependents required?
Lilliana, according to the link you put in another post, income for independent students needs to be $49,999 or less for simplified needs. This includes income from both spouses added together for a married couple.
And they still must satisfy one of the other questions…eligibility for means tested benefits, OR eligible to file 1040a or 1040ez, or dislocated worker.
I think the title is misleading the OP…Altho he may not think of the extra property as “investment” property, it is an asset because it’s not the primary home.
Since he’s not living in the condo worth about $35k (his only offer), that is an issue. However, how much does that really add to the EFC? $2100? and this would be for one time, correct?
If the 2100 hit is too much, then delay school for a semester/year…and apply for aid after the condo sells.
However, a condo that costs that little might make a nice investment rental property. can you rent it out? That may prove to be better for you in the long run.
Oh of course…I was just using the $35k figure as the amount that the property should be considered as an asset since typically you’re supposed to use the amount that you could quickly sell the property for (not sure if realtor/selling fees should also be subtracted…I think so)
Well if someone came and offered me $100 for my home, I could “quickly” sell it for that much… but that’s not what it’s worth, which is what the FA forms want to know. So no, you don’t use the amount that “you could quickly sell the property for.”
^^
Obviously that would be crazy, but it has been said many times here that that is what you’re supposed to use (but probably the BEST PRICE you can get with a quick sale…not a crazy give-away)
I think some people are using this advice, which isn’t found on FAFSA website, but seems to be often given:
[QUOTE=""]
Value real estate correctly. Parents who own a rental or a second home shouldn't enter its market value [on FAFSA]. Instead, enter its net worth. That's the value minus any debt owed on it.
[/QUOTE]
What’s more, you needn’t start by valuing the property at its market value. Rather use its quick-sale value, Wagar says. That’s 80 percent of the property’s fair market value, the Internal Revenue Service says, or what it could sell for quickly.
Unfortunately, Ms. Wagar doesn’t provide any explanation for why it’s OK to report the value of investment real estate at 80% of fair market value, when the FAFSA directions say this:
If your parents own real estate or investments other than their principal residence, the value equals the amount they are worth today. Investment debt equals how much your parents owe on real estate and investments other than their principal place of residence. Investment debt means only those debts that are related to the investments. Subtract the amount of debt on these assets from their value. Indicate this amount in question 91 for net worth of investments.
I’m just saying that this has been the “common wisdom advice” given here on CC for years. While it may be wrong, I suspect that it must be based on something accurate otherwise it would have been corrected awhile ago.
That advice comes from what’s-his-name’s “Paying For College Without Going Broke”, and has been directly quoted in multiple threads over the past few years. Could do a search to find the exact quote.
I wish i could rent it but it was a bachelor pad for my bro and I… we werent concerned with updating anything… carpet, HVAC, cabinets, bathroom… all 20+ years old so and all the people who want to buy it to rent it out say “yeah, 55k is reasonable, less new carpet, less new HVAC, less a new bathroom and kitchen, and so 35k take it or leave it”
thing is the cheapest ive seen anything in there go is 40k… im not the chump to have the lowest sale ever. in 2004 I paid 78,500 the sum total inheritance from my mother. If I only get back less than half of that I would look at it as squandering the only leg up she was able to give me. I will not do that.
As for the FAFSA, Ended up taking EFC hit… sadly I think that will be every year till it sells (not that I intend to hold it that long but just FYI)
Fed doesnt look like they help much with grad school anyway… hopefully wifie’s 4.0 will help pay for it…
You can call the finanical aid offices and ask them what they will accept as market values. Getting three local realtors that are listed as mainstream give an estimate will do. I would ask for a 3-6 month sale estimate, not what zillow or comparables have. I called some fin aid offices a few years ago and they felt that was reasonable, along with a long outdated index which puzzled me (don’t remember the one–seen it in other house estimate info as well). Don’t short yourself in what you can get in aid, because you aren’t likely to get any increases when the numbers are examined.
Well, some paint on the walls and cabinets and inexpensive laminate from HD might make it rentable…improve it’s look. (it sounds very small so you might even find enough clearanced/discontinue laminate to put down.)
I recently got some clearanced flooring for 28 cents a square foot! Are you handy? Can you fix/install some things if they’re not too complicated?
It certainly is not reasonable to take that much off the selling price. . (seriously, if you want to pursue the angle of minor upgrades to rent it out…send me a PM. I own rentals and I know how to buy and upgrade on a strict budget…I know where to put the dollars.)