How to get a second place for my college age kids!

Question

We lucked into a rehab project and successfully run a short term rental in Bell Buckle TN. It has approximately $200,000 in equity and currently cash flows about $1500/mo ( we split this cash flow and equity 50/50 with my mother that is my business partner).

We have 3 kids and the oldest is about to go to UTK for college. We are interested in acquiring a property that she can live in starting her sophomore year and hopefully have roommates pay for the mortgage.

Any tips on the best way to finance this? We dont have cash reserves, just equity and cash flow from the one rental. Should we somehow help her make it her property as a first time homebuyer since she is 18 and she has $6000 saved up? Should we buy it her freshman year and let others rent it before her or wait until she can move in? We live 3 hours from Knoxville.

Tia!

Cory King · Answer

@Candy Kimbro Congrats on your STR property, nice cash flow for sure. Some banks may lend as a HELOC on the rental property, or refinance it, but you're right you'd have to get your mom on board for that.

Love the idea of helping out a first time buyer, may run into trouble if she's not the primary resident, check w/ lender but I don't think that'll fly w/o more of a down payment. I know UTK typically has freshmen in the dorms first year so it may be tricky.

I've definitely seen parents purchase properties close to campus to house their kids while they're at school, it's a solid move. We've got a few homes near campus we use as student rentals and they certainly perform well. Averaging $1k/mo per bedroom which is now on the cheaper side of things.

I'd consider doing some kind of cash out refi on the property at a number you're both comfortable pulling out, while still leaving $ for reserves to maintain the STR you currently have. It'll restrict that cash flow, but unlock a nice option for the family. Especially if the other kids follow suit, they'll likely need some kind of housing for a significant period of time nearby so buying now wouldn't be the worst move.

Just my 2 cents. Happy to help however I can.

Andrew Steffens · Answer

I am not sure if you have TD bank there but they do HELOC on up to 4 investment properties. Im sure some other banks do too.

Candy Kimbro · Answer

We own it 50/50 with my mother so would need to get her on board but dont understand how the numbers would work with that option.

Jaycee Greene · Answer

Hi again @Candy Kimbro. Have you considered refinancing your STR to pull out cash to apply to a purchase in/around UTK?

How to get a second place for my college age kids!

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