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Old 03-14-2018, 12:00 PM
 
9,818 posts, read 13,892,257 times
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1. go ahead and buy property. Nothing illegal in that.
2. Connect with a reputable property management locally and put your son on contract with them. In that manner, you have as much work to do as to review monthly statement, yearly statement and write off related expenses on taxes. PM takes care of all the other concerns expressed here so far.
3. if your son refuses to go on contract, you forfeit the idea of buying property. As THEN it will be BAD idea to proceed "on trust".
4. if YOU do not want to do contract (e.g., highly developed maternal/paternal instinct somehow blocking you from going that safe route), you should not be even considering such a plan. It's destined to go bad.
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Old 03-14-2018, 12:15 PM
 
3,325 posts, read 3,260,957 times
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If your son is a reliable good kid, then this is a very smart move. If he's an irresponsible jerk, it's a very bad idea. In fact, if he's an irresponsible jerk, you shouldn't even have sent him out of state for college, but should have sent him cheaply in state. But that's another issue.

Buy a property that is very close to campus, has several bedrooms - as many as possible. If you can get a house, instead of a condo, no condo fees. And they can shovel and cut the lawn themselves. Doesn't have to be in perfect cosmetic shape - by the time they're done with it, it won't be!

Make him the building manager. He will rent rooms to other students, his friends. They and their parents will sign leases for the rooms and pay rent.

PAY him a princely monthly sum to manage the property! Now, all the money that you "pay" him, will be deducted as an expense against the rent that is collected. He uses his pay to live on and to pay some of his tuition bill. So now, instead of giving him after tax money, he is "earning" pre-tax money. Plus, he gets a 1099 for his earnings in that state. So if he transfers his driver's license, registers to vote, earns and pays taxes there, has a utility bill in his name there, he's a resident, usually after a year.

If you have another money-making investment property anywhere else that has positive cash flow, and the student house has negative cash flow, you get to deduct the loss against the profit on the other rental property. You also get to depreciate the student house on your taxes.

After he's done there, sell it to another family doing the same thing, or on the open market. Real estate very close to campus is usually an excellent investment, because students want to move off campus.
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Old 03-14-2018, 01:18 PM
 
16,490 posts, read 17,513,441 times
Reputation: 23546
Quote:
Originally Posted by little pink View Post
I am possibly going to purchase a small condo in another state soon. I already own my own home , the condo will be in my name but my son will be living there for a few years. We are doing this to get instate college residency. I will then sell after he finishes college. My son will be paying the condo fees and utilities . My question is am I looking at any problems legally with this situation ? When I sell will it be considered a rental property or just a second property? Should I have a written contract with my son just in case ? What if he tries renting out a room to someone without my knowledge ? I really want to help him but so many things can go wrong.

Ok. Imo

Best to buy it as a rental as you get nice deductions.

Your son becoems the manager. You pay him to do the managing. This is deductible to you. If you keep the payment under 12000 (maybe 15000 now) he doesn’t have to declare it or file taxes as long as he doesn’t make more than that. Talk to a tax guy they will get a plan going .

You can rent out the additional bedrooms (ONLY with a written lease) to other students. They each have their own lease as a separate lease. This way you can individually give notices to vacate or raise rent as each lease is a separate entity.

The utilities go in his name and he charges the other tenants a %.

Once done keep the property as a future investment.
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Old 03-14-2018, 02:08 PM
 
1,408 posts, read 807,636 times
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Quote:
Originally Posted by Electrician4you View Post
Ok. Imo

Best to buy it as a rental as you get nice deductions.

Your son becoems the manager. You pay him to do the managing. This is deductible to you. If you keep the payment under 12000 (maybe 15000 now) he doesn’t have to declare it or file taxes as long as he doesn’t make more than that. Talk to a tax guy they will get a plan going .

You can rent out the additional bedrooms (ONLY with a written lease) to other students. They each have their own lease as a separate lease. This way you can individually give notices to vacate or raise rent as each lease is a separate entity.

The utilities go in his name and he charges the other tenants a %.

Once done keep the property as a future investment.
Unfortunately you're overstating the tax benefits. Expenses on rentals are only deductible to the extent of the rental income. The best you'll do is net zero impact on your tax return. Google "passive activity loss".

Also, since you can depreciate the property and deduct other passive expenses, you won't have net positive passive income under a normal circumstance anyway so you won't have a spare $12k/yr to pay the son. Most rental properties are deep in the red for tax purposes and due to depreciation, it will be a decade or longer before they are profitable enough for there to be a need to try to reduce taxable passive income.

I have a rental property that throws off a $600/mo cash profit but loses almost $900/mo for tax purposes, and I don't do any tax gaming. The extra $300/mo of losses doesn't offset my ordinary income but instead gets carried forward to future years; it'll eventually flip once inflation causes the rent to increase by enough to turn a profit.

Easier just to buy the house and pay the expenses and let the kid live there. Worry about the rental income after he moves out. Life is too short to bother with all that.

Last edited by NYCresident2014; 03-14-2018 at 02:16 PM..
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Old 03-14-2018, 05:18 PM
 
Location: Somewhere in America
12,305 posts, read 10,048,458 times
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Typically, he has to live there for at least a year as a resident which means in state driver's license, vehicle registration, insurance, mail delivery, voting, and living there. You should speak with a tax accountant about what take repercussions there may be for you.
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Old 03-14-2018, 10:52 PM
 
Location: Silicon Valley
2,747 posts, read 1,209,866 times
Reputation: 5047
Quote:
Originally Posted by little pink View Post
I am possibly going to purchase a small condo in another state soon. I already own my own home , the condo will be in my name but my son will be living there for a few years. We are doing this to get instate college residency. I will then sell after he finishes college. My son will be paying the condo fees and utilities . My question is am I looking at any problems legally with this situation ? When I sell will it be considered a rental property or just a second property? Should I have a written contract with my son just in case ? What if he tries renting out a room to someone without my knowledge ? I really want to help him but so many things can go wrong.
Well, let's take at some of those first courses:

Humanities 101
I'd advocate that he spends the first year in the dorms. It doesn't save you money, but it makes meeting people and establishing his own network a lot easier and faster than living off-campus right away. Then see how he does. After that, then look at buying a place after he gets his freshman mistakes out of the way.

Finance 101
Another thing to consider is who's saving money. Student A attends school and goes the traditional route. If tuition is out of state at 15 and cost of living is 10, but the student graduates and makes 50. The you have a -25, -25, -25, -25, +40 = End of year 5 = -60

Student B bums around for a year to get residency, dropping the tuition by 10K a year. Everything else is the same:
-10, -15, -15, -15, -15 = End of year 5 = -70
Not to mention I couldn't think how many bad habits I'd pick up to be 18 with nothing to do all day except study for one freshman level class.
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Old 03-17-2018, 10:33 AM
 
379 posts, read 179,751 times
Reputation: 741
Quote:
Originally Posted by MrRational View Post
That all depends on how the college/state qualifies for in state tuition rates.
But most states have gotten wise to the scheme by now.


Talk to your CPA.


If you have concerns at this level don't do it at all.

In fact ...you should EXPECT him to have a roomie of some sort.
If YOU can't handle that don't do it at all.


There is no scheme nor illegal activities. Both of my sons qualify for 124 free credit hours from the VA , its called tuition and fee exemption for children of a disabled veteran in Indiana due to the fact that my ex-husband is from Indiana and disabled. I have a cheap condo under contract in Indy. My son will live there for 12 months and become a resident , get a job , drivers license etc. In one year he will qualify for 4 years free tuition at Iupui . In 5 years we sell the condo . My son doesn't party , he should be fine. My question was when we sell this condo will it be considered a rental property ? The condo will be in my name, my son can either slowly pay me or just live there and pay the utilities and small condo fee if he doesn't want to purchase from me.
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Old 03-17-2018, 07:13 PM
 
Location: Raleigh NC
7,755 posts, read 6,114,541 times
Reputation: 6882
Quote:
Originally Posted by MrRational View Post
That all depends on how the college/state qualifies for in state tuition rates.
But most states have gotten wise to the scheme by now.


Talk to your CPA.


If you have concerns at this level don't do it at all.

In fact ...you should EXPECT him to have a roomie of some sort.
If YOU can't handle that don't do it at all.
what this person said.
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Old 03-17-2018, 07:19 PM
 
Location: Raleigh NC
7,755 posts, read 6,114,541 times
Reputation: 6882
Quote:
Originally Posted by little pink View Post
My question was when we sell this condo will it be considered a rental property ? The condo will be in my name, my son can either slowly pay me or just live there and pay the utilities and small condo fee if he doesn't want to purchase from me.

since critically important details were left out of your initial post, let's just stick to this -

you'll need to ask your CPA about this. No layman can give you the most appropriate answer.
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Old 03-18-2018, 12:33 PM
 
Location: Wisconsin
272 posts, read 90,149 times
Reputation: 556
little pink, most states require for the student to actually live in the state for a specific period of time before they're even considered a resident. You know your child better than anyone, but in my experience (and my oldest is 29) kids can make some really dumb choices and I have wonderful kids, with kind hearts, but they have made some dumb mistakes; as kids do. Does the cost of the home, maintenance and all the possible issues that come with home ownership outweigh the cost of tuition and dorming? I moved to Wisconsin 5 years ago and rented out my home in NY for 2 years to family and that was a nightmare. They never paid the rent on time and truth be told, people won't take care of your property like you would, family or strangers!

Good luck with your decision!
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