- Lynnette Khalfani-Cox, a money expert and author, stumbled upon a strategy for saving big on her children’s college expenses when her daughter lost her scholarships: buying a condo.
- She found that buying the condo helped her daughter establish residency for in-state tuition, built her credit as a young adult, and made housing much more affordable than college room and board.
- While buying real estate doesn’t sound like a money-saver, Khalfani-Cox estimates she saved $25,000 to $35,000 per year with her daughter at the University of Texas at Austin — and she said it worked so well that she’s doing it with her son at North Carolina State.
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For Lynnette Khalfani-Cox, a personal-finance expert, buying her children their first home was always in the plan. But what started as a promise to her kids turned into a money-saving plan to combat many struggles of today’s young adults, like building credit, dealing with the rising costs of college, and coping with high housing costs in many cities.
“We made commitments to all three of our kids,” Khalfani-Cox told Business Insider. “We’ve told them, essentially: ‘Your job, first and foremost, is be a good person, and be a good student. If you hold up your end of the bargain and do the right things, this is what we’re prepared to do for you: We will buy you your first house, and we will pay for your college.'”
But after going off to college at the University of Texas at Austin, Khalfani-Cox’s daughter Aziza had a hard time adjusting, ultimately losing many of the scholarships that made it affordable for her to attend. Since Khalfani-Cox and her husband had already planned to buy their daughter a home, they decided to do it sooner rather than later, as owning a home would help Aziza establish residency and lower her tuition from the yearly out-of-state rate of about $30,000 to the in-state rate of about $10,000.
Khalfani-Cox put a lot of research into the plan before buying.
“The state of Texas has their guidelines, and it’s very specific,” she said.
And it won’t work for everyone — it’s legitimate only if the student intends to live there for a while.
“My daughter loved Austin from the very beginning, and I knew she wanted to stay,” Khalfani-Cox said.
That’s when the family knew that the plan was a go. They found a two-bedroom condo in Austin for $210,000 just before Aziza’s second year of college and jumped at the opportunity to buy.
“We put 10% down, or about $21,000, and we had about $4,000 in closing costs,” Khalfani-Cox said. “We started encouraging her to do things to show that this is really a bona fide residence and that this is where she intended to make her abode.”
After graduating, Aziza got a job in Austin; she’s now engaged and plans to stay, Khalfani-Fox said.
Ultimately, Khalfani-Cox saved $40,000 in tuition alone over the two years her daughter officially had residency.
The condo also provided a very affordable place for her daughter to live during college and beyond. Aziza lived with two roommates (she shared one of the two bedrooms with a friend) who paid a combined $1,400 in rent, which covered the mortgage. Room and board for a school year at UT Austin is estimated at $10,070, a cost Khalfani-Cox saved starting in Aziza’s sophomore year. She said Aziza now intends to pay part or all of the mortgage each month.
In addition to having a stable home after graduation and savings of about $30,000 a year in tuition and room and board, Aziza could build credit through this strategy, since her name is on the mortgage.
“My daughter’s credit score is in the high 700s, and that’s rare for somebody right out of college,” Khalfani-Cox said.
And the family plans to do it again.
“Because it worked so beautifully, we said, ‘Let’s do the same thing with our son,'” Khalfani-Cox said.
She bought her son a townhome near North Carolina State University in Raleigh and paid cash for the property, which was listed for $158,000. After a few renovations, the family listed the two-bedroom home for roommates, and since there’s no mortgage, Khalfani-Cox plans to get rental income.
The difference between in-state and out-of-state tuition at North Carolina State is about $10,000 a year, while room and board is estimated at about $11,000 a year. The family will save on both of those expenses starting in her son’s sophomore year.
“The savings is phenomenal — you’re saving, you know, $25,000 to $35,000 per year,” Khalfani-Cox said of her experience with her daughter. “Then putting a 10% down payment becomes less onerous.”