Give Your Kid’s a Chance

A Webinar with Larry Kendall

  1. “What are your goals for your kids?”
  1. College by the numbers:
  • $1,200,000 – increased lifetime earnings with a bachelor’s degree compared to a high school diploma (Source: New York Federal Reserve Study)
  • $45,327 – average starting salary with a bachelor’s degree (Source: National Association of Colleges and Employers)
  • $18, 943 – annual cost of tuition, fees, room & board at a public university (Source: College Board)
  • $42,419 – annual cost of tuition, fees, room & board at a private university (Source: College Board)
  • 48% - percentage of parents who have saved anything for their children’s college. The average amount saved is $10,040 (Source: Sallie Mae & IPSOS Public Affairs)
  • $1,300,000,000,000 ($1.3 trillion) – amount of college debt in the U.S. (nearly $30,000 per graduate) (Source: Sallie Mae and U.S. Federal Reserve)
  • Two greatest misuses of college debt: ______& ______.
  1. Consequences of student loan debt (Source: National Association of Realtors Study):
  • 71% have delayed purchasing a home
  • 24% delayed starting a business
  • 46% of young millennials are living at home with family
  • 31% of current homeowners say student debt is keeping them from selling their current home and purchasing a new one
  • Stress – most student debt is not forgiven in bankruptcy
  • Delay in wealth creation

  1. The easiest way to pay for a college education.
  1. The case for real estate:
  • Peter Lynch: “The greatest investment I have ever seen is ______.”
  • Dr. Thomas Stanley (Author of The Millionaire Next Door): “More wealth is created through real estate than through any other investment.”
  • Warren Buffett: “Only invest in things you ______.”
  • Real estate is a simple investment.
  • Most people understand homes
  • Homes are one of the 3 basics: ______, ______, ______.
  • Your tenant buys the property for you
  • Homes generate income
  1. Real estate tools and rules of thumb:
  • Don the Carpet Layer’s Success Formula: ______% down and break-even or cash flow
  • Four benefits (returns) of real estate
  • Cash flow
  • Principal reduction
  • Appreciation
  • Tax Savings (depreciation)
  • A Simple Investment Analysis
  1. Five Magic Questions
  • ______
  • ______
  • ______
  • ______
  • ______
  1. “Give Your Kids a Chance” brochure
  1. Your Mindset: “A house for every child.”
  1. What if they are ready to go to college?

Simple Investment Analysis

Address______

$______Price

Closing Initial

$______Downpayment + $______Costs = $______Investment

$______Loan @ ______% for ______years = $______Monthly P & I Pmt.

Estimated Cash Flow

$______Net Monthly Rent (Gross Rent less Homeowner’s Fee)

($______) less Monthly Principal & Interest Payment

($______) less Monthly Taxes

($______) less Insurance

($______) less Other ______

$______Monthly Cash Flow x 12 = $______Annual Cash Flow

Three Returns on Investment

1)Cash Flow

$______Annual Cash Flow

______= ______% Cash Flow Return

$______Initial Investment

2)Principal Reduction

$______Annual Principal

______= ______% Principal Reduction

$______Initial Investment

3)Appreciation @ ______%

$______Annual Appreciation

______= ______% Appreciation

$______Initial Investment

Estimated 1st Year Return on Investment (1 + 2 + 3) = ______%

Simple Investment Analysis

Address____948 Pioneer Drive______

$_200,000______Price

Closing Initial

$_ 40,000______Down payment + $_5,000____Costs = $_45,000_____Investment

$_160,000______Loan @ _5.5__% for __30___ years = $_908.46_Monthly P & I Pmt.

Estimated Cash Flow

$__1,400.00____ Net Monthly Rent (Gross Rent less Homeowner’s Fee)

($____908.46____) less Monthly Principal & Interest Payment

($_____89.00____) less Monthly Taxes

($_____50.00____) less Insurance

($____170.00____) less Other: Maint. ($50) & Mgmt. ($120)______

$____182.54____ Monthly Cash Flow x 12 = $_2,190.48___ Annual Cash Flow

Three Returns on Investment

4)Cash Flow

$_2,190.48______Annual Cash Flow

______= __4.87__% Cash Flow Return

$_45,000.00______Initial Investment

5)Principal Reduction

$_2,155.34______Annual Principal

______= _4.79%_% Principal Reduction

$_45,000.00______Initial Investment

6)Appreciation @ __2___%

$_4,000.00______Annual Appreciation

______= _8.89___% Appreciation

$_45,000.00______Initial Investment

Estimated 1st Year Return on Investment (1 + 2 + 3) = _18.55__%

Give Your Kids a Chance

FACT 1 – “The Haves And The Have-Nots”

The gap between the rich and poor is growing rapidly across the United States. The richest 20% of US households receive a greater share of national income than the middle three-fifths combined. The bottom 40% are worse off in inflation-adjusted terms than similarly situated people two decades earlier. (Source: US Department of Labor)

FACT 2 – “A College Education Is The Difference”

Earnings of full-time workers who have a college degree continue to accelerate faster than those with just a high school diploma. The average college graduate earns 89% more a year on average than a worker with only a high school diploma. Each year of formal schooling after high school adds 5% to 15% to annual earnings later in life. (Source: US Department of Labor)

FACT 3 – “College Costs are High and Rising”

Today, the minimum per year cost for a student attending a 4-year, in-state university is about $20,000 per year. This cost includes in-state tuition, books, and room and board. It now takes an average of 5 years to graduate. Only about 40% graduate in 4 years. Here are the minimum costs of a college education based on 5 years to graduate and college costs rising at 5% per year.

Now$ 100,000Future 5 Years$127,628

Future 10 Years$ 162,889Future 15 Years$207,892

FACT 4 – “You Have Four Choices”

  1. Pay college costs out of ordinary income. Add 25% to 30% to cost for taxes.
  2. Student works to pay part of costs. This could take longer to graduate with the higher possibility that the student will dropout.
  3. Student loans. College graduate starts out in life deeply in debt.
  4. Pay college costs out of assets. Buy a rental property that will be free and clear.

The easiest way to pay for a college education is to buy a rental property when your child is young, and put the property on a 15 year loan. Here’s the equity created in a $200,000 rental property with a 20% down payment and a 15 year amortized loan at 5.0%:

Equity Now Equity in 5 Years Equity in 10 Years Equity in 15 Years

*$40,000$ 80,708$132,952$200,000

**$40,000$135,964$258,731$415,786

* Assumes no increase in property value ** Assumes 5% per year appreciation

If your child is already a college student, purchasing a property is still an excellent solution to curbing the high cost of education. The investment property can be a place for the student to live and provides a source of income (roommates) to help pay the mortgage.