Income Property
by Jim Scott

Several months ago in this space I wrote about an easy way to save for college expenses or retirement. Several people commented on the article and asked me to reprint it. So here it is. (slightly changed) 

Investing in Location 
This column will discuss how certain properties should achieve the goal of providing, in 15 years, the funds necessary to pay for a good college education. There are two components to the program, The Product and The Method. 

The Product 
The most important decision you will make is the purchase. You should buy good triplexes or four-plexes in the 92103 zipcode. It should have all the right elements for success; charm and location. On average, these investments will require an initial outlay of $40,000 to $125,000. You should break even for the first three years of the investment before tax. The investment should be a net positive when you calculate in principal reduction and income tax savings. 

The Method 
The second most important part is the financial discipline not to spend the cash flow. You must apply all cash flows to the existing mortgage.This can be difficult but it is the key to success.You may also add additional funds monthly-it acts as a lucrative savings account. For example, if your mortgage is 8% and savings accounts yield only 3%, applying extra cash to the mortgage in effect doubles your interest income on those additional deposits. 

By year 15 or 16 this property should be free and clear. At that point, the positive cash flow will easily send your child to college. But the best part is that when that obligation is finished, you still have the free and clear asset and monthly cash flow! This is very different from an investment account that is used for college expenses and is exhausted at graduation.

If you are still not a believer, just call me for more details. I have a triplex "dedicated" to my 7 year old and a 5-plex "dedicated" to my 4 year old. I am through saving for college. Done. I have it professionally managed (by Scott & Quinn Property Management) and I do nothing. When my kids are finished with their higher education, I could comfortably retire on the cash flow or maybe buy a Ferrari. 

A Great Deal With Great Location 
The shopping center at 1111 Fort Stockton Drive is available for $1,050,000. This investment will require $350,000 but will have immediate cash flow. It will yield, in today's dollars, about $90,000 per year in 15 years. Why not put a few friends together and form a neighborhood partnership? I can help you with this process. The property is very easy to manage and is surely a trophy property. 

You can reach Jim Scott by email or at his office at 1111 Fort Stockton Drive. Jim's direct line is 885-9511. 

Jim has been a homeowner in Mission Hills since 1976. Scott & Quinn is the oldest full service real estate company in Mission Hills. There is also a professional property management team on staff.