Save room and board costs while attending ASU buying a home along the Phoenix Light Rail line




Recently an out-of-state parent asked for my assistance in finding an investment property for their son to live in while attending Arizona State University (ASU). Their goal was to pay ALL CASH for a 3 bedroom home so the son wouldn't have to live in a dorm and pay room and board expenses. Charging two students rent to live in the home with their son should more than cover the home's carrying costs, too. Buying an investment property near ASU along the Light Rail line simplifies transportation and parking issues at ASU. View Phoenix, Mesa and Tempe AZ homes and condos for sale along the Phoenix Light Rail Line priced up to $300,000 to see what is currently available for sale.

Bank of America, in conjunction with Merrill Lynch, has a financing program that allows the investor to keep 100% of their money in their Merrill Lynch investment account working for them and finance 100% of the purchase price of a residential investment property at a very low, owner-occupied equivalent, interest-only, loan rate by simply pledging part of their investment portfolio assets in their Merrill Lynch investment account as collateral (an amount approximately equal to ~ 39% of the value of the investment home financed). See loan term summary in attachments below.

In this example, if my client currently has or is willing to open a Merrill Lynch investment account with the $300,000 cash he was going to pay to purchase the investment property, he only needs to “pledge” ~ 39% of his investment portfolio (~ $117,000) as collateral for a Bank of America 100% financed home loan to purchase an Arizona investment property bought for their son's use while attending ASU.

Rather than paying 100% cash to buy the investment home, my client keeps 100% of his money in his Merrill Lynch investment account working for him, borrowing $300,000 for the purchase of a home in Tempe AZ at a very favorable owner-occupied equivalent, interest-only loan rate described below. He still enjoys the appreciation of the investment property, eliminates room and board costs for his son at ASU, collects rent from two students, who prefer to live off campus rather than in the dorm, to pay investment property carrying costs, while accruing all the tax benefits of investment property. After the son's graduation, my client can continue to own and rent out or sell the home in Arizona to unrelated parties and move their investment asset closer to their home with a qualified 1031 Tax Deferred Exchange. Please consult with your tax advisor prior to making a purchase and then call Sam to discuss your options for when your child attends one of the many schools in the Phoenix area.

This is an exciting opportunity that Merrill Lynch and Bank of America offer. Ask your investment adviser and banker if they have a similar program and let us know if the terms match or are better than these. To be clear this program does not have to be for a family member attending college. It can apply to any investment property occupied by non-family members. As with any tax planning event, consult with your accountant or tax attorney.

In this scenario, a parent is buying an investment property for their child to use while attending ASU in the Phoenix AZ area, but any investor can purchase an investment property with a 100%, interest-only loan under the terms described below without regard to the tenant being related to the investor.

Consult with your tax advisor about 1031 Tax Deferred Exchange guidance for properties occupied by related parties.

Consult with your tax advisor about renting investment property held within a Self-Directed ROTH IRA to a related-party.

Pledging a portion of your invest portfolio as collateral for 100% home purchase loan - page 1

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Sam Elam, Associate Broker Berkshire Hathaway HomeServices Arizona Properties serving Chandler, Gilbert, Mesa,Phoenix, Scottsdale and Tempe AZ
Sam Elam

Arizona Associate Broker, CRS, GRI, e-PRO, SFR
Berkshire Hathaway HomeServices | Arizona Properties

Sam has 25+ years of full-time real estate experience assisting buyers and sellers transact homes for sale in Chandler, Gilbert, Mesa, Phoenix, Scottsdale, Tempe AZ, and investment property.

Contact Sam to discuss your next Arizona home purchase plans and schedule an appointment to see how he can help make your plans become a reality.