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<p>But then they will have these rents to include as income.</p>
<p>Yes but it might ease their cash flow issues. Thanks vball I have never done the “long computation” so it’s interesting to see how this plays out.</p>
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<p>Yes and they should probably consult someone who knows what they’re talking about and knows their full situation better than any of us do, but I think the mortgage can be written off against the rental income, leaving them still with negative income from the property if the rent doesn’t cover the mortgage and other direct expenses.</p>
<p>From a Profile-based aid point of view, it should be a wash, though they may end up paying more taxes as their AGI would probably not remain as low.</p>
<p>My recollection is that the Profile asks the year the property was purchased (some schools apply the Federal housing index to the purchase price), the amount of the purchase price, and the amount of the mortgage, if any. It’s been a couple of years since I filled in the Profile, so I could be mistaken. </p>
<p>Seems like the best next step for the OP is to confirm that the rental properties were reported at their net value (if positive) on FAFSA and that the college understands that they have negative value as an asset when calculating their (the college’s) definition of need.</p>
<p>This is speculation…the rental properties may have a negative value to the owner (in that they owe more than the properties are worth). BUT they could still have significant value. For example…if the owner paid $500K for the properties that were worth that at the time…those properties might still have a value of say…$300K each (if sold). NO RIGHT NOW the owners are under water…and yes that is an issue for them right now. </p>
<p>BUT perhaps they are holding onto these properties in anticipation of them increasing in value (again). Otherwise, why would someone continue to take a huge loss on the properties.</p>
<p>The college may very well be assigning a value to these homes…I’m not saying that these underwater properties might not be causing the family some financial issues NOW but unfortunately, properties DO have a value…even if your loan is more than what that value is. Maybe the college is seeing it that way…just speculating. The college might not be in the business of providing need based aid while a family is holding onto potentially valuable real estate.</p>
<p>^^ that was my thought Thumper. An asset that can be sold has a value…the value for which it can be sold and most likely that value is higher than what the college might exclude in their calculations. That’s is sort of the definition of an asset. If they rent them even rent them at or below what the market bears it will increase their cash flow and still most likely show as a loss on taxes with depreciation, the mortgage payments, the insurance, the taxes all expenses that don’t increase the out-of-pocket assuming they do have the properties insured and are paying the taxes. That part is “not difficult” to figure out and one would assume that was the original intent in acquiring the properties. </p>
<p>I’m not sure what the best “appeal” would be to the college for this OP and all this really doesn’t help. Right now the OP can’t afford this college. If the parents are in as really bad of shape as the OP states they probably can’t even co-sign loans although they might still qualify for PLUS although I’m not sure how wise that would be to go that route.</p>