Behind the Scenes w/ David Brown - Real Estate is WAY better than a 529 College Savings Account.
Beyond the 529: How I'm Using Real Estate to Secure My Kids' Future
Forget those meager 6% returns from traditional college savings plans! As an entrepreneur and filmmaker, I'm always looking for smarter ways to invest. So, I'm ditching the 529 and betting on real estate to build a solid foundation for my children's future. This article will break down my strategy.
Real Estate > 529? Here's My Thinking
529 plans are popular, and if you have one, great! But let's be honest, a 6% annual return? That's just not cutting it for me. I wanted something more powerful, something that could truly set my kids up for life. That's why I turned to real estate.
The House-for-Each-Kid Blueprint
Here's the core of my strategy: I bought a house for each of my two kids. To protect them, I made the purchases under LLCs. I didn't go through the typical MLS channels either. Instead, I went straight to a real estate wholesaler. You can also find deals through probate and bankruptcy court.
Let's look at the numbers from the first house I bought:
Purchase Price: $130,000
Renovation Investment: $50,000
Total Investment: $180,000
Appraised Value (Post-Renovation): $275,000
Instant Equity: $95,000
That's right. I instantly generated $95,000 in equity. So what did I do with it?
Cashing Out and Generating Income
I cashed out the equity and put it into a separate account. Then, I rented the house out for $2,000 a month. That $2,000 covers the taxes, insurance, and the cost of the cash-out refinance.
My plan is to repeat this cash-out refinance process every 3 to 5 years.
Setting Them Up for Life
By the time my kids are 18, they'll be set financially, whether they choose to go to college, travel the world, or pursue other dreams. This one simple decision provides so many options, unlike a 529.
They'll have choices:
Passive Income Stream: Keep the house as a rental property and enjoy the monthly cash flow.
Mortgage-Free Living: Move into the house and start their adult lives without the burden of a mortgage.
Plus, the home should continue to appreciate in value over time, further increasing their wealth. Ultimately, I want my kids to have something solid to fall back on, a safety net that empowers them to pursue their passions without financial stress. And it doesn't matter to me if they go to college or not.
A Look Inside One of the Houses
Let's take a look at one of the houses I bought. It's a standard demo for my rentals, focusing on quality and durability.
Key Features
Flooring: I use LDP Flooring. It's dog-proof, waterproof, and kid-proof – perfect for rentals.
Windows: All the old windows are replaced with new, insulated ones.
Paint: I prefer Origami White for a clean, modern look.
Lighting: Recessed lighting brightens up the space.
Drywall: Any old paneling is removed and replaced with drywall.
Cabinets: I typically use prefab cabinets from Lowe's cabinet section. You can find them in white or gray.
Countertops: Granite countertops add a touch of luxury.
Appliances: Stainless steel appliances are standard in all my rentals.
Washer/Dryer: Each unit includes a washer and dryer.
This particular house had a unique challenge: a narrow space for the refrigerator. That's why you see a narrower fridge in the photos. The house was a complete gut renovation. I'll be posting before-and-after photos on my Instagram profileunder #davidbrown #davebrown, so be sure to check them out!
Property Details
The house is a three-bedroom, two-bath with 1,640 square feet of living space. It features a master bedroom with two closets, a restroom, and two additional bedrooms.
Exterior Upgrades
I don't skimp on the exterior either. This property got a brand-new roof, new gutters, new windows, new garage doors and openers, and a fresh coat of paint (primed with Kilz). Landscaping is still in progress, and a new front door was installed.
My Rental Philosophy: Quality and Care
I know some people might think I'm spending too much on a rental property. But I believe in providing a good quality of life for my tenants and taking care of my assets.
By investing in high-quality renovations, I minimize maintenance issues and ensure the property appreciates over time. I don't want to constantly be dealing with repairs and disrupting my tenants.
The Long Game
This isn't about quick profits. It's about building long-term wealth and security for my children. Real estate offers a tangible asset with the potential for significant appreciation and a consistent income stream. That's a far cry from the limited returns of a 529 plan.
So, while others are saving for college with traditional methods, I'm building a real estate empire for my kids, one house at a time.