Rental Properties

Paying for College
21

<<<
soontocollege wrote:
our houses are two 3 family homes so 6 apartments in total with 6 individual rents.

@sylvan8798 wrote:
6 apartments is not a full time job for 2 people. Not even for one person.
<<<

That was exactly my thought (and I own rentals). I think the family is going to have to make a decision IF they want their child(ren) to have several choices for college.

If they’re fine with having their child just commute to the local CC or state school, then super…nothing wrong with that.

If their child will have the stats to get significant merit at some schools, then super, but usually those aren’t full-rides, so parents will need to increase income to pay for room, board, and other costs.

If they want their child to have the option to “go away” to school, where the parents will pay for their “expected contribution,” then one parent will probably have to return to work full-time, and the other may have to work part or full time.

.

22

Good news is that a full time job might cover health insurance which this family is likely paying out of pocket right now…

23

@blossom That is exactly what I was thinking. Having to purchase insurance, even subsidized, would take a chunk out of their rental income.

24

Like I said…this family may find that deductions taken for their rental properties are allowed for tax purposes, but are not allowed for financial aid purposes.

25

thank you all for great contributions an ideas. i was hoping for suggestions and directions so i can then steer in some meaningful direction to be prepared when the time comes.

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@MurphyBrown
I’m not an accountant either…or a tax expert…but I do have self employed business owners in my family.

They cannot file a 1040EZ or 1040A.

27

Okay, so the consensus seems to be that you can’t rely on need-based aid, and need your daughter to qualify for generous merit aid. So here’s what I’d recommend:

(1) Have her prep for the PSAT and SAT this summer. She should tackle one subject at a time, without worrying about time limits, and just keep working at that subject until she’s mastered it. Then move on to the next one. It’s an intense process, but it’s worth it for her to have mastered both of these tests by next fall.

(2) Register for the October administration of the SAT.

(3) Take the PSAT on its regularly scheduled date (likely a week or two after the SAT) and treat it like it counts - it’s NOT just a “practice test”!

A high enough score on the PSAT could qualify your daughter as a National Merit Scholar, which, in turn, would make her eligible for some very generous scholarships.

Meanwhile, if she takes the SAT in October, that gives her plenty of time to retake it in November or December if she needs to . . . and then she shouldn’t ever have to worry about it again. You’ll know her scores, and know which schools she’s competitive for. And there are several schools that offer guaranteed merit awards for kids with SAT (or ACT) scores above a certain cutoff - so you’ll know way ahead of time which of those she’ll qualify for. And if she’s applying to schools that require SAT subject tests, she’ll have plenty of time left to do those.

Since she has to do the PSAT anyway, that’s why I’m recommending that she focus on, and prep for, the SAT. But if she really has problems with it, and can do better on the ACT, then that’s the test she should go with. She still needs to take the PSAT, but she can devote most of her time to ACT prep. The PSAT qualifies a candidate for National Merit status, but it’s the SAT/ACT scores that count for all other merit awards, and for admissions. A strong SAT/ACT score is essential . . . a high PSAT score is just icing on the cake.

P.S. If you actually do live in Massachusetts, your daughter would have to score ridiculously high on the PSAT to qualify for National Merit status. The students in each state compete against all the other students in that state - and Massachusetts is full of high-achieving prep school students. That doesn’t mean it’s impossible, but she’d have to do really, really well on the PSAT to qualify. So if it turns out that the SAT just isn’t her thing, and she likes the ACT better, don’t worry about it . . . just focus on the ACT.

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@thumper1 not an accountant either but if OP puts her real estate into a C corp (instead of an LLC) then she would become an employee of the C corp and could file a 1040EZ if her income is low enough. The C corp would be taxed separately and would not be part of the FAFSA review or the simple needs test (again double check). For one kid it is probably not worth it but an accountant and financial aid consultant would have to advise her. Her daughter would have to be able to get into a meets full need college which are usually mostly in the top 50 or so.

There are plenty of schools in the deep south with automatic full tuition so that might be a better option.

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The problem with this scenario is that the “full need” schools generally require the CSS Profile, which is going to require disclosure of the C corp. So, despite having jumped through all those hoops, the family will be right back where it was to start with.

See this old thread for more info on C corps:

http://talk.collegeconfidential.com/financial-aid-scholarships/1148217-s-corp-to-c-corp.html

30

Great thread. I wondered how that 1040EZ worked. I just ran the numbers through a full need NPC, assuming all assets were put into a business and income was $49,000 and it still comes up with them paying close to $35000 even with aid.

What about UMass as an option? Since it is state do they look at business assets, whether C or LLC? I have no idea, just wondering.