<p>Dd is currently a junior and would like to attend a lac for college. Dh and I have some money in our savings we are considering using to purchase another small home to use as a rental property or buying a small vacation cabin for ourselves. Dh will not use the money for college and I will picking up the tab myself. </p>
<p>I need to think of some ways to use this money so I am in the best financial aid situation. </p>
<p>Any recommendations?</p>
<p>I'm slightly confused by your post. You have some money and would use it to purchase a second home or rental property. Your husband will not let you use that money to send DD to college. You will be paying for DD's college yourself. Is that right? If so, with what other funds would you be paying for DD's college? I believe if you purchase the home and title it in both your names, FAFSA will count it as an asset. In my case property belonging to a business I own counted as an asset even though I have no intention of selling that property. I have some other thoughts on rental property vs. vacation but please repost so I understand a little more.</p>
<p>Please define a lac. Any equity in a rental property will count against you, assuming you own it for financial aid, but if you show a loss on Schedule E, it could even out. To be in the best financial aid situation, start a small business and title the rental property in it - no loss of financial aid. There's a glitch in the FAFSA for next year and hopefully beyound.</p>
<p>What if you buy the house and then can't afford to send your daughter to college???</p>
<p>Reecy, hmm. Our rental property is owned and titled in the name of our business and I was led to believe last year thtat it would count against our FAFSA. In our case, it probably didn't matter because even without it we didn't really qualify for anything. Weenie: good question. That is a bit of what I was getting at.</p>
<p>In general, buying rental property to bring liquid assets down isn't a great idea. Oddly, buying a primary residence or paying down the mortgage CAN be a good thing for FAFSA schools.</p>
<p>Exactly. Your primary residence won't "count" against you. If you are lucky enough to have liquid assets you are supposed to use them for things like college.</p>
<p>Ebeeeee, sorry for the lack of clarity in my post. </p>
<p>Reecy, lac= liberal arts college</p>
<p>I will be returning to nursing within the next year or so, and all of my income will go toward tuition. Paying for education has always been my responsibility and agreed upon by both my husband and myself. I believe my income will be stable (returning to a previously long-term position) and significant enough to pay a good portion of college costs. </p>
<p>However...I am trying to not get nailed, if possible, by the savings. We were originally interested in buying a second home, but were unsure how this would factor in for our estimated need. We have a large amount of equity in our current home and pay cash for just about everything, including cars. Wonderful for a credit rating, terrible for financial aid -- at least from my end of it... </p>
<p>Just looking for suggestions to put myself in the best postion possible.</p>
<p>Thanks everyone.</p>
<p>I'm sure there are people on this board much more expert than me, but I can not see how spending assets can possibly improve one's real-life situation with financial aid. Don't forget that most need-based financial aid packages contain loans. </p>
<p>Speaking from experience, we've never regretted having substantial money saved for college. While it may have hurt our EFC, in the long run it really didn't make any difference for us as income was the main factor in our high EFC.</p>
<p>Also speaking from experience, second homes cost money day in and day out - money you might wish you had for your d's college expenses.</p>
<p>The equity in your current home will not count 'against' you. Paying cash for everything will not count against you. You could pay down the mortgage on your current home if you really want to pare down your savings. Then you would not be listing those funds on your FAFSA. Before you do that you should consider whether you will needs those funds. If for instance, you pay down your current mortgage and then for some reason you cannot work or your situation changes would the cost of borrowing money for college be more than the interest you are currently paying on your mortgage?
As far as rentals or second homes, I agree with weenie. There is cost day in and day out..</p>
<p>just to mention something that has been posted before -- make sure that all loans and debts are paid off, since they don't subtract them when figuring out the EFC. Since you said that you paid for most everything in cash -- you probably don't have any, but it is worth mentioning.</p>
<p>Look ahead four years and see what significant purchases may need to be made and make those purchases now. Remodeling the house, landscaping, new car/cars, computers, etc. I am not suggesting you go crazy and spend all the money on stuff you want -- but if you know that you need to remodel the bathroom and fix the plumbing soon -- that would be a good investment.</p>
<p>Would dh allow some of the money spent towards items your dd will need at college (computer, car, etc) -- another use for liquid assets.</p>
<p>Finally -- have you considered a rental property near the school she will be attending? That is what my parents did way back when and myself and my two brothers lived in it while we attended school. It worked out well and they still get income on it today (many, many years later).</p>
<p>Rental property is a good bet if you want to lose money</p>
<p>I have to disagree here. I own rental property and I do not lose money on it. Your results will vary depending on the area of the country you are in, etc. etc. That said, the previous posts highlight some concerns with buying rental property solely for the purpose of sheltering funds away from college expenses and EFC...</p>
<p>Unless you live in the sticks, or put huge sums of money down (100's of thousands of dollars) or have owned real estate for longer than 5 years, you will most likely lose money. The value of real estate has far outstripped rents over that time period. Including various outlays required, maintenance, water (always paid by the landlord), traveling back and forth to the rental property, taxes etc etc, you will not have a positive cash flow.</p>