[USER]

Please help us with some advice as we are still relatively young and did not have any financial guidance when we were younger.

We are in our 30s. A family of 3. Our child is in kindergarten – she goes to a private school with $1000/month.

I make 82k a year and my wife 110k. We currently have some savings but I don’t think much.

401k: 140k + 38k

Primary home: 650k with 440k mortgage. 2.75% rate.

Rental property: 360k with 240k mortgage. 7.25% rate.

This unit is rented out to our parents so we do not have cash flow, just enough to cover the mortgage payment.

We bought this mainly to help our parents because they have a special situation.

We live in a high living expense area but we live carefully. As you can see, we don’t have much financial leverage.

Thankfully, we have been able to save 75k in a brokerage account.

Please give us some advice on our situation:
We want to have that rental property as a college fund for our child in the future.

We do want to find a way so our parents don’t have to make $2000/month payment but have a much lower rent.

Pls, they have a situation that won’t allow them to live anywhere else but only on our owned property.

What should we do to grow our assets? Should I consider waiting and buying another property with our 75k or pay it toward the rental property?

Thank you so much for your kind and wise advice.

[Moore]

There are NO scholarships for retirement. It’s great that you want to use the property as a possible college fund, but she can also work, get scholarships, go into military, etc.

to help cover college expenses. For growing assets, keep it simple.

Max out retirement accounts (if possible), invest in index funds, weigh the pros and cons of buying another property (To me it’s risky because that just adds more debt).

Is the brokerage account also your emergency fund or do you have an another account for that?

[Sarah]

I would wait until interest goes down and refinance the rental.

[Scott]

I’d stay away from more rentals until you have more money elsewhere.

My next steps would be to target refinancing the parents property within 6 months rates should be down to 6% maybe 5.75 that should give you a little better spread.

Invest in 401ks up to match and start thinking about 529’s after that you can start looking at another rental.

[Stacey]

This aint a great real estate market for investing. I would start an auto invest system on payday into some index funds at say, Vanguard.

[John]

I would make additional principal payments on the rental property for now and refinance it when rates eventually go down.

[Brandy]

We paid for my grandson’s private kindergarten via donations that were/are tax deductions.

There is a program for that, your school should have info on where and how to do it.

The tax deduction allowance may not cover it all, but it helps.

And others can also donate and nominate your child as can businesses and employers.

I think private kindergarten for my grandson was SO good.

It offered so much – small facility, small class size, more thorough education, lots of outdoor play, and other skills like communicating, etc.

It really was the best decision.

And luckily, his mom moved into a better school district for 1st grade.

He’s now in 5th grade and loves his school, but I still see the foundation created by his kindergarten year.

I second refi-ing the rental.

That will go a long way.

At 7.25%, I’d put my $75k on that all day long.

At 5% or less, I’d weigh it vs other factors (debt tolerance, other emergency funds available, ROI on other options, etc)

[Stef]

Why private school? That’s a long 13 years of payments… which could go a long way towards supplementing your child’s education with family trips and other educational opportunities.

[Cheryl]

I’ve seen many families pay a retirement or college tuition worth in private K-12 school tuition and their kids do not seem to have done better in terms of the colleges they attend, life skills, work ethic, emotional intelligence or career success.

What do you think of your public schools?

You mentioned HCOL area.

Maybe worth a second and third look with as open a mind as possible (understanding myself that the school decision is emotional, and multifaceted).

$1,000/mo tuition over 12 years is more than $144,000 it’s the lost opportunity of $144,000 invested (which would be more like $260,000 toward college and retirement).

I realize I’m treating a complicated decision like only a math problem.

Also, your child is at an easier age to change schools now than later.

What happens if financial conditions change?

[Author]

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