<p>I don’t see Penn thinking that there is a “situation” here. Since the banks have loosened a little bit, probably the best bet is for them to try to get a home equity line on one of the condos.</p>
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Crazy idea here: How about use it to pay for your college education?</p>
<p>I’m not a banker. Can they get a home equity line on a rental property?</p>
<p>OP…your issue is you need to come up with about $30,000 to attend Penn this year. Where is that money going to come from? I would not advise a family with a $59,000 income to take $30,000 a year in PLUS loans. Sorry but I just would not.</p>
<p>You can ask Penn to review your aid, but you DO have those assets.</p>
<p>Were any of your other schools more affordable? Is Penn the only school being considered at this point? What will you do if Penn does NOT increase your aid? How will you pay to attend?</p>
<p>Unless something change or there was an error in your reporting of your family financial situation, your appeal with Penn should not yield anything extra for you this year. </p>
<p>Selling condos might help you the following years but things also could back fired on you. Any profit from the sales would generally be treated as capital gains and income for next year. The FA office will see exactly what you trying to do and I am not sure how things will be treated since they have this year and then next year file. What about the loss of income from the rent vs the mortgage that you don’t need to pay any more, or opportunity cost that you might lose if the real estate market turns up in a big way in the future? Or the mortgage deduction that you will no longer get?</p>
<p>Selling 600k worth of real estate do cost money, time and effort, not something to take lightly.</p>
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<p>And I think we have a winner!!!</p>
<p>Just to be clear, the purpose of selling the condos would not be to hide the assets so that you would qualify for financial aid, but to have the funds available to be able to pay for your college education without financial aid. Why is that such an elusive concept???</p>
<p>I could be totally off base, by here is how I see it…</p>
<p>If the family is able to sell the condo for $300,000…they would still likely receive similar aid from UPenn. The only difference is the asset would be a more liquid one…so the money would be available for college costs. At the end of four years, UPenn will not have taken ALL of that asset, but rather a %age of it.</p>
<p>“If the family is able to sell the condo for $300,000…they would still likely receive similar aid from UPenn.”</p>
<p>There is no way to tell. They are CSS school, and their supplement asks on top of CSS again for the mortgage/value of the primary residence and other homes that your family have. My sense is you maybe right, and since they already have your previous year filing, they know exactly what you are doing.</p>
<p>If your parents were working for a company where their retirement monies were in officially designated retirement accounts, instead of rentals, they would not be showing on FAFSA, though the value of retirement accounts is still requested on Profile. I don’t know how much more or less a retirement asset is tapped versus a non-retirement asset. The important thing is that this may be your parents only retirement fund. If so, you really cannot afford $120k+ for Penn, it may seem like it now, but what about someday when they need those condos for income or to liquidate and create a retirement income?</p>
<p>What other school options do you have? Anything with a lower net cost to you?</p>
<p>Do your parents feel they can afford this?</p>
<p>The condo market is soft, it could take over a year to sell a condo. It’s especially harder to sell rentals when renters are in the uniit.</p>
<p>I highly doubt they could refinance one of the condos. the lending market is still VERY tough on condos, even when it’s the primary home. Much worse when it’s a rental or second property.</p>
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A problem for OP, but certainly a cautionary tale for those with younger students–planning for how to pay for college has to start long before spring of senior year.</p>
<p>OP, I think you just need to pick a school based on current available cash flow. Eligibility for aid is determined by the assets you have, not your cash flow. Your parents have chosen to put resources into assets that are not liquid. As noted above, it’s hard to just up and sell assets like home, farm land, ownership in small business but this is not new. Colleges don’t really care and really can’t get into how you’ve allocated the resources that you have control over (may get some understanding for extraordinary medical bills, etc but different topic).</p>
<p>Do you have option other than Penn? Looks like a huge gap to make up.</p>
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That aspect shouldn’t be a problem. The question is rather whether you can get financing on a condo. Actually, I’m wondering how it matters, since the main point is that it is a rental unit - an apartment, as it were. Why even CALL it a condo?
Well that depends on the renters and on the buyers. Someone looking for an investment and finding a unit with long term stable tenants would see that as a desirable situation.</p>
<p>an apartment, as it were. Why even CALL it a condo?</p>
<p>I don’t think you get to call it what you want. I don’t know how it works in NY where “apartments” are sold, and may get treated differently loan-wise, but in Calif and Alabama where I own some condos, we don’t get to choose to call them something else for lending purposes. I don’t know where the OP lives.</p>
<p>^I’m wondering how the condos are rented out. MIL/FIL had one in Florida that was rented by the week and got tenants mostly during the vacation seasons. OTOH, we have apartments which are typically leased for 1-3 years at a time, not by the week. The renting model could have a major impact on whether they could borrow against them.</p>
<p>It doesn’t sound like a vacation rental because the OP said that a tenant moved out and it remained empty for half the year.</p>
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<p>Or:</p>
<p>Family C has $59k annual income, 2 kids, and $600k worth of retirement assets in an IRA.</p>
<p>This family gets treated the same as family A. Is that fair? Not everyone’s retirement assets are in so-called “retirement” accounts.</p>
<p>I think the OP’s best shot is to go for a professional judgment from the FA office, trying to convince them that the condos are essentially the parents’ retirement fund. Especially if they have no other retirement assets.</p>
<p>I also think the parents could likely get loans against the condos without too much trouble, as long as they keep a lot of equity in them, like 50%.</p>
<p>One issue I see…this family income is only $59,000 AND the OP says they have a huge mortgage on their primary residence. How in the world would this family qualify for additional home loans? In addition, the incomes for these rental properties does not sound very high. </p>
<p>I’m not a banker but I wonder if they would even be able to get additional loans given their income and other outstanding mortgage debt.</p>
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“Huge” doesn’t really mean anything. Without knowing the dollar amount it is impossible to say what might be possible.
What’s reported on line 17 is net of all expenses - commissions, utilities, insurance, taxes, depreciation, travel, repairs, etc. That number is completely believable to me.</p>
<p>A CSS Profile school will most likely add back in depreciation, and maybe some other expenses.</p>
<p>Even if it were possible to refinance the house and the two rental units to reduce the equity in the rentals those rentals will still count as assets and most likely have some amount of value. H and I have a fairly diversified portfolio and did not put all our savings in 401Ks and it “hurts” when it comes to college. Looks great on paper, not so easy to write huge college checks. Perhaps we would have done something different 25 years ago when we started having kids, but there’s no looking back. Hard to say if the OP’s family can refinance and selling rentals isn’t something that happens quickly as banks are still chinzy about financing them. Even my insurance guy told me this year they are getting hard to insure in our area (when I decided to shop our rentals insurance). The OP is best served by figuring out what is affordable given the current situation in my opinion.</p>
<p>You are right. Your family is not rich. You would be much better off to sell the condos now and pay off your home mortage and use the extra money to pay for your college. What did your parents originally pay for the condos? Although the market has recovered somewhat you may be overvaluing the condos asset worth, as was noted above. I find it hard to believe that 600k worth of condos generates only 8k/year in income, even with vacancy issues. I understand line 17 is net, but for parents needing to pay for college now and no immediate hope for a huge increase in the condos values this investment isn’t right for your family. If they want keep the condos, then you’re better off going to a cheaper college. Primary home equity is ignored by FAFSA and is probably treated more leniently in CSS/profile than rental condos.</p>