We are US citizens who live overseas and DH is an IT consultant with his own co., making a range of 50-100K/yr. We are renters. We have four children approaching college age who plan to attend university in the US. Our home base (where nearly all our extended family lives) is Michigan. For various reasons we need to be back in Michigan for a year. As we look at the cost of renting a house in Michigan, we are wondering if it would be wise to purchase a house instead, renting it out after we leave. (Normally when we make trips back we stay a shorter time and just stay with relatives.) We don’t know how long we will remain overseas, but we both have parents who are aging, and the children will all eventually be in the US, so we’re thinking it might be nice to have a home base of our own in the US. I know that in determining EFC, the rental property will add in as income, as will the house itself - not sure how much that will affect things, as we are not low-income. We do have a few good options for managing the property while we are away. Anyone have opinions on the wisdom of buying in this situation?
Why would this matter in terms of college? Do what you think is best for your family.
We have expat relatives who own a house in the states. They describe it as a headache…and they have excellent management.
Plus…when you eventually move back, you may find that your location and house desires will be different than fr this one year gig.
I would rent.
Are you thinking that if you own a house in Michigan your kids would have a state where they’d get in state tuition rates?
If you own the house…an rent it to others, I can’t see how that would establish residency in Michigan.
My expat relatives owned a house…and did not have instate status because of that.
@thumper1 : Yes, that’s true that we might otherwise choose to live elsewhere. Nearly all of our family is in Michigan, and we feel strong ties there, having both grew up there. Right now DH’s work enables us to live essentially anywhere, but that could change. If your relatives describe their house as a “headache” even though they have excellent management, do you know why? Is it because of the repairs and upkeep, extra costs during the year? I’d love to hear more details if you can.
@Madison85 : We’d love to get in state tuition at Univ of Mich where both DH and I did undergrad, but they are insanely strict about residency requirements and it wouldn’t be possible for us. Not sure about other Mich state schools - they might be more lenient.
I just read in another thread something like “don’t do anything for financial aid reasons that you wouldn’t do otherwise.” - I’m thinking the opposite is true - don’t NOT do something for financial aid reasons that you would otherwise do. My concern is how much this decision might add to our EFC (well, in addition to the risk/responsibility we’d be taking on.)
@thumper1 : You’re right, it won’t establish residency.
" Right now DH’s work enables us to live essentially anywhere, but that could change."
Then why not consider Michigan as your “essentially anywhere” for the high school years so that at least one kid can be in-state there?
To see how the equity in that home and possible rental income would affect your federal EFC as calculated by the FAFSA, print out the formula and work through it on paper: https://studentaid.ed.gov/sa/sites/default/files/2016-17-efc-formula.pdf
To see how the equity in that home and possible rental income would affect your costs at places that use the CSS Proile, choose a couple Profile institutions, and run the Net Price Calculators at their websites.
@happymomof1 : Checking these on the FAFSA and Net Price calculators - good idea (should have thought of that!). Thanks!
Michigan is a big state. Every town in Michigan has assorted kinds of housing in it.
If you buy something for the one year…you could find yourself wanting a different something when you eventually move back here permanently,
Why is it a headache for my expat relatives. Well…first of all…it’s not free to have a property management company. Second…they actually have changed management companies several times. Each time, the person managing their property starts off terrific…but in each case, that person left, and the new hire was less than good. They have to make quick decisions to do repairs and the like usually based on an email. They never get the chance to see the issues for themselves, or get bids for the jobs. The property management company has preferred vendors the use…period.
Just last year, my relatives did a total renovation of the kitchen. In that case, another relative,actually stepped on to help.
The point is…even with a property manager, they property is still theirs.
Oh…and vetting renters? Some have been terrific, and others…not so much so.
With 4 kids and an income under $100k, assuming no significant assets, you will get plenty of FA at meets full needs schools. Rental income will only reduce that. Income counts more than assets at about 20% while assets count under 6%. So you would need to run the numbers to see your net income on a rental. Some CSS schools will also disallow depreciation so your income may be higher than your taxable income.
The one place you will not get as generous aid as an OOS is UM, while they do give some. They do count home equity. Even better is if two kids go at the same time. As was already suggested, the NPCs are your best bet using different scenarios. Although keep in mind if you have more than two years assumptions and rules may change. A big recent change is the prior prior year. Now for the Class of 2017 they are looking at 2015 as the reference year instead of 2016.
What I would personally factor in is what you think the housing market is going to do and whether it will decline or you will be priced out when you finally do move back (obviously not something anyone can tell you but something that people use their best guess on). Sounds like a headache unless you can find a relative you can trust to rent it from you and even then, you have that whole blood and money risk.
Michigan housing prices aren’t exactly skyrocketing.
Neither were Florida or Arizona 6 years ago! Now try buying something.
I have no idea, as I have been to Michigan once, ever. OP should be the one to evaluate where and if she should or not purchase.
@SeekingPam : “With 4 kids and an income under $100k, assuming no significant assets, you will get plenty of FA at meets full needs schools” – I have not run any numbers yet, so this is news to me. I thought 100k put us well over that line, and the main reason I have been wondering about how a rental property will affect our EFC is because DH’s salary is not entirely consistent and sometimes goes lower. Anyway, I will run the numbers.
@intparent : yup, that’s a fact. Sad Michigan. Still, its better than it has been.
@thumper1 : We actually have two really good options with family doing the rental management - one, a nephew who is a very responsible Mr. Fixit and could use some extra income, and two, an unusual situation where a sibling who owns two rental properties has someone looking after them who can also do ours as well (free for us). We’d probably go with the nephew to help him and niece out. But I hear you about the exact type of house and location maybe changing later. And vetting renters makes me nervous.
I’m not sure the net price calculator will work well for this family. The parent is working out of the country, and therefore would preumably have the income exclusion allowed for expats who are employed abroad. Not sure how,that plays into what the net price calculator actually asks.
Maybe someone else here knows?
Just ran Vassar for fun. Gave significant aid if you have 4 kids, ranging in age from 16-6 (randomly picked) and your total assets were $100,000 with a salary of $100,000 and no home. Since most top 50 privates are over 65k a year, that would be your entire after tax income without need aid.
Normal caveat is that of course your children have to get into a generous meets full needs school as the lower in ranking you go the less likely they are to meet need. The other is that given your H is a business owner, the NPC is not always as accurate as for a W2 employee since certain business expenses may be disallowed.
Michigan is pretty economically depressed, even without the recession, and has been for many years. Housing prices all over Michigan, except maybe Ann Arbor and a couple of wealthy enclaves near Detroit (and I really mean only a couple) are very, very low. Parts of Detroit with a lot of foreclosed homes are literally being bulldozed. Housing prices aren’t climbing drastically any time soon. The economy of most of the LP was dependent on the auto industry, including a lot of suppliers to the industry. K-12 schools aren’t great – when there were so many good manufacturing jobs historically, all you needed was a HS degree to make a good living. Now the economy is struggling to diversify and the school problems remain.
@SeekingPam : Wow, thanks!! 
So, what was “significant aid” (and that was a very accurate guess about the ages of our kids!) ?
@intparent : Yes, Michigan is a sad place now and has been since the automotive industry vacated. Still, there are many lovely cities - its not all like Detroit. And housing prices are actually much better now than they have been in the previous five years.
They are better, but I don’t think you are going to see raging prices in 5 years, for example. Michigan has been struggling economically for as long as I can remember (I grew up there, and my dad & other family still live there).
Homeowner and U of M student here. I don’t think Michigan is a sad state at all. Yes, Detroit, Flint, and others aren’t doing well for many reasons but the majority of the state is still pretty danged fine IMO. (At least in terms of the economy… our government leaves a lot to be desired but that’s another story.)
Michigan, by and large, is a cheap place to live. I will say though that housing prices around here (I’m between Ann Arbor and Detroit) have definitely gone up in the last few years. I bought because I saw them going up and prices are still steadily increasing.
Owning a house will not qualify for instate tuition at either U of M or MSU. I can’t speak to the other schools but considering that schools get just about bupkis from the state in terms of funding, it wouldn’t surprise me if residency requirements were pretty strict throughout the state.
Already deleted but I think your EFC for Vassar was around 19k based on a 16 year old, 12, 13 and 6 year old, with your husband born in 1977 and with adjustments to income of 10k, deductions of 15k and child credit of 4k and savings of 100k with the business worth nothing (if it has no real hard assets, you do not value good will or so I was told) and your child holding no assets or income. Although there is another thread where someone is saying that although their EFC was low, their Vassar FA was not great. Since I am considering it for K2, I have been doing calculations on their NPC and following the thread. I would suggest running the numbers on the NPC at whatever schools you are interested in. Caveat, since your kid is probably a sophomore, if you do not have SATs ACTs or junior grades they may end up not getting into a full needs school that is generous.