Rich Dad advise needed on investing strategy

10 Replies

I wanted to pose this question to a BP forum to get your take on this. Private school or more expensive home? So Rich Dad Poor Dad has left quite an impression on me. I'm being very mindful to adding to my asset column and not my liabilities column. I don't live in a bad area at all, but I would like to improve my children's schooling location whether thru a better school district or private school. Private school will cost me about $11K per year for both my kids and they are now only 4 & 6. So potentially that will cost me $132,000 until both my kids graduate from High School. That doesn't jump out as a great investment when you look at just the numbers and it's 100% a liability unless you say I'm investing in my children :) If we move into the area we are looking at my house payment will most likely jump from about $1,000 per month now (crazy low and it's a 4/2 with a pool and completely remodeled) to a payment of around $4,500 per month if I buy the house my wife wants. I can afford the payment, but do I want to afford the payment. I won't need to incur the cost of private school and I can rent my current primary residence for about $2,900 per month. I will have to take out a HELOC on my primary now to come up with the 20% down on the other home so that will add another $450 per month to my current primary residence payment. So I'll net about $1,450 from my rental to go towards the $4,500 monthly payment. My other concern is I had planned on using my HELOC to accumulating investment property via the BRRR strategy. I feel this will surely set me back on my investments plans although my current primary will become a rental. Thoughts? Maybe you can see why I'm driving myself crazy. I can find a cheaper home in the new school district but that will still yield about a $3700 payment and will be a similar house to what I already own...thanks in advance for your advise.

Welcome @Chad Reidlinger ! I have a similar mentality and live near you in south Florida... Down here and your location, the "above average public  schools " are few and far between, however; they are out some. Why don't you move to something like a Weston, rent your home now, and take the money as a down payment on something there?

  I value education and we all know your kids are s great investment... But you can do both 

Chad, Money is cheap right now so why take the 20% out of your home instead of just exploring your lower down payment options? Not sure what your income is but it sounds like it's pretty good so barrow more. As for the private school vs Public.. I tell all my clients that my views on school is you get out of it what you put into it. What I mean by that is if you and your spouse are not also helping them learn then why spend the extra money on private school? Is it so you don't have to get involved? There may be better school districts in the area but school and teaches are tools and should just be part of the bigger learning strategy. What do the teaches know that you can't teach them especially at such a young age? Las Vegas is the worst school system in the nation yet they still have kids that go to college and become Dr's and Lawyers. 

I'm going to address this from the parent/husband of a teacher perspective.  We live in Las Vegas NV.  Consistently ranked in the bottom 5 states for education.  We also raised three daughters here and they all went to public schools.  All of them graduated in the top 5% of their classes coming out of high school.  they all went on to college, and got there degree or are working on getting their degree and at the end of the journey, we'll be the proud parents of a Doctor, a Lawyer and a School Teacher.  the statement above regarding you get out what you put in cannot be more accurate.  I am a product of private schools myself (although it as back I the 70's!) and I do not feel I got a better education (other than religion classes) and I certainly did not get in any less trouble simply because I attended private schools...probably got in more.  Personally, I'd rather do what I need to do to keep my kids safe in the public school environment (my kids went to some rough neighborhood schools because that's where the accelerated learning schools were located in our district...so we drove them to school and picked them up) and be an active participant in their education, supporting the teachers that for the most part, really do know what the heck they are doing, and let them get a great education and a better than great "real-world" view of their surroundings.  That's my $0.02 worth on that.

As far as the move up goes...my wife and I were in the same situation.  I was perfectly happy with the home we had been in for 15 years and had it just the way we wanted it and almost paid off.  Then we decided to build a "castle" and capitalize on the boom (back in 2003).  We came to our sense in the middle of that, sold our position in the house before it was done and stayed put for another 8 years (thanks God!) then we moved into a house that was twice as big as our old one, and yet half as big as the one we were building prior (as our kids were now all out of the house and in college or beyond) and we are far better off and happier for doing it this way.  You and your wife need to figure out your plan of course, but maybe you do it in two steps.  Move into a house that takes you where you want to be for the better schools in your area, but only takes your mortgage from $1000 to $2500-3000 a month.  rent your current home and get settled into the new one and then take a shot at the additional building of rental real estate.  I think you can do everything you want to do and achieve all the goals you want to achieve.

Hope this helps.

My best education was from eating dinner at the table everynight with dad and mom.


Frank

Frank Romine, Real Estate Agent in CA (#01957844)
Originally posted by @Chad Reidlinger :

 We had a similar dilemma years ago.  Lived in a decent school district, but things were changing so we had a choice similar to yours & went thru the same analysis paralysis.  The combined tab for the schools we evaluated & eventually chose was ~$50K per year.  At the end of the day we made our decision based on how well prepared our kids would be & not our own P&L statement.  So we stayed & they all went to private schools.  The eventual payoff for us was what we saved on universities as they each got either full rides or close to full ride scholarships.

We are extremely involved in our kids education which sometimes makes us more aware of the issues unfortunately.  We do however work with them both each night and I will absolutely be giving them the other side of the education talks as well :)  Thanks for everyone's input thus far...

An idea I pose to your situation is why not have it all? Can you hold off on the schooling for a few years and perhaps invest in real estate and use the cash flow to pay for your children's education? Essentially your goal will be to cash flow $1k/month to cover school bill. You will produce and asset that will allow you to move forward where as paying for school right away slows your investing down and does not guarantee your children's development be any better off then what it was before (although it likely will help).

But that is if you decide it is best for them to go to school for higher education. Ideally they can receive an education from you by including them in the REI process. Looking back at my education and development I was always interested in what my dad was doing in our basement which was running his company and watching stock shows. I was much younger then my sibling that are close in age, my theory is they had each other to entertain themselves I had my dads business to entertain me. Although the route I decided on is different then his stock route the investing interest was sparked at a young age.

We faced almost the same dilemma with our children, who are also 4 and 6.  We ultimately decided that the benefit of growing up in a household of investors far outweighs the risks of them being affected by the possibility of a less than stellar education.  Children who have great, supportive parents do well in school, period.  It really doesn't matter whether they are in public or private.  Around here, private is more of a status symbol than anything else.  

Our goal is to raise children who are financially literate.  We were not gifted this from our parents, and just like so many others, we entered the rat race immediately after college.  Our hope is that our kids learn early what we learned late.  

We actually downsized in both home and mortgage to reach our investment goals faster.  It has been an adjustment, but we're all still here breathing.  :-)

All that to say, there is more than one type of education to be concerned about.  You'll just have to weigh the pros and cons, assess your goals, and make your decision from there.  Good luck!

Well, since you said Rich Dad advice I'll speak for Robert Kiyosaki. <speech> School isn't going to help your child succeed. School is going to train your A student to work for the C student. School is going to teach your child to fear failure and follow the herd.</speech> If you want lots more of that angle (and talking endlessly about buying his CASHFLOW game and flying in Vietnam), check out his book Why A Students Work for C Students.

In my case, we found a great Charter school for my daughter. It is tons better than public, and I believe probably better than private because they teach better ways to think. The great thing about Charter is that it isn't region specific, so as long as we can get her to/from school each day we can live where we want.

As everyone else has said, it doesn't really matter the school because YOU are her most influential teacher. Your excitement for learning, helping, and being involved is infectious to your children. Spending that time going over their day so that all their interactions become learning moments that night is priceless. There are good and bad schools, but that just determines the amount of effort you need to put in.

I forgot to mention in case you didn't know. A Charter school is still public funded (at least it is in CO) so I think we pay an extra $25/year because of the better classroom materials they buy.

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