D got a great package this year (2015-2016) from a full need school. We are considering buying a rental property with technically little or no money down (financed thru family). If there is no equity in the rental and the rent goes to paying the costs (mortgage and insurance) does it change the aid drastically? Profit/net income would be minimal for the first few years. Thank you.
It would depend on the school. You will have expenses and the like related to that rental property. Those might be allowable deductions for IRS purposes but might not be for financial aid purposes.
In addition, your rents will be income.
Perhaps someone here with rental properties will chime in.
But really…what you are asking…is if the school will continue to subsidize your daughter’s education so that you can own rental properties. That really isn’t the purpose of need based aid.
Where would the rent be coming from? Would there be other renters in the house?
In another thread, you mention that you have an EFC of $1000, if that held up with CSS, that means that your D got nearly a free ride (maybe a student/family contribution that will cover personal expenses and travel).
So, I’m guessing that the grant award includes an amount that covers tuition, room and board? If so, you’ll be using the room and board grant towards the mortgage?
I don’t think my first post made sense, though I see what you’re saying. Thanks, it was a long shot anyway.
Wait, so were you going to buy a rental property for your child to live in at college and have her aid plus other renters pay for mortgage and taxes?
OP, if you didn’t have much equity in the rental, and the net income after expenses was negligible, it shouldn’t affect the aid by much. In this time of low mortgage rates, equity builds quickly, however, so it could affect things more in a few years or for other children coming along. Can you say ballpark how much you would be paying for this rental?
ETA: Ignore the naysayers on this topic on these threads. 
@sylvan8798 please re-read post #1. Depending on how the school handles assets like rental properties the expenses may not be considered. In that case the OP would just be raising the family income (with the attendant loss of aid).
What lender is going to fund a mortgage to buy a rental property without a down payment? Even if someone else makes that down payment…there WILL be equity in that rental property.
And truthfully, what this person is asking is if their need based aid in the future will continue to be as high so that they can pay for college…and this rental property.
I think the school would consider that if relatives were underwriting your investments, that your relatives were also expecting to help with your family’s education expenses.
So probably not a great idea, if you were hoping for need based aid.
@emeraldkity4 the schools would have NO idea what another relative would or would not be willing to do regarding educational expenses.
But this student had a family contribution of $1000. On next year’s fafsa and Profile, they are going to list ownership of a rental property?
If these other relatives want to purchase a rental property and this student plans to live there too, I would suggest that the other relatives put the rental property in their name…not the parent of the student.
If you qualified for the simplified needs test then this could impact your Pell grant. A rental property will require you to file an 1040 which could make you ineligible for the simplified needs test.
But PROFILE asks what additional money they expect to receive don’t they?
I assumed that a full need school used PROFILE, my bad if it didn’t.
Yes…what additional money the STUDENT receives is a question…but that has absolutely nothing to do with the issue of what the relatives intentions are in the future…none at all.
If the parents are partners (or sole owners) of the rental property, the equity and the income from the property will reduce FA.
If the parents fund the down payment and let the family member be the sole owner of the property, they might lose the property or will face a lot of difficulty to ask the legal owner to sell the property or transfer the title back later. Even when the legal owner is not greedy, things can get out of hand. For example if the owner dies, the property will belong to his wife or his children. I have seen some family disputes in this matter.
I’m very impressed someone with an EFC of 1K is planning to buy a rental property.
Boy the snark is always thick on these threads.