Last week I talked about the basics behind a Coverdell Education Savings Account (CESA). This week I want to explore a strategy for maximizing it’s potential.
One of the fastest ways to grow a Coverdell account that I have found is through the use of wholesaling properties. As a real estate broker, this isn’t my primary business, nor is it even a major focus in my business, but I have two children in high school with major aspirations of college. Think $$$.
Just learning about Coverdell Education Savings Accounts (CESA) this year and an oldest that is 17 years old, I determined that I needed to get a boost! Keep in mind from the previous article in the Coverdell ESA Investment Series, there are limits to your investments into a CESA. You must deliver all of your cash contributions into the account by the time the student reaches the age of 18*.
Another important reminder is the limit of $2000 after-tax proceeds that can be invested into a CESA annually. Fear not, we are going to talk about how to build that $2000 into a meaningful amount of cash for your student.
Here Was My Strategy:
- I opened a CESA account at one of many custodial account service holders. This is the likely the same list of custodians for self-directed IRAs.
- Established a limited amount of funds (limited to $2000)
- Located some properties in my local market area that needed to sell, but were off-market—Wholesale deals
- I put a $100 earnest deposit from the CESA onto each of the properties.
- I then found a wholesale buyer for these properties using my existing network of buyers.
- I did a double close on these transactions, yielding a …read more