I was walking on the beach with a friend after a meeting in San Diego in January. It was 85 degrees and sunny. As we watched his daughter splash in the waves we talked about saving for college. He has two daughters (7 and 9 years old) and said he’s saving $150 per month for each in 529 plans. He asked what I was doing for my two sons (of similar age). I told him that I didn’t have a 529 plans (college savings accounts).

Now, the debate about whether college is worth the investment or not is a topic for another day, but the question here is, “What are some ways that you can pay for college, that are different than your typical 529 savings plan?”

Let’s say you are married with 2 children. At 32 years old you have your first child and another child 2 years later (as I did). I’m thinking about the future and I look at opening a 529 Plan and go to one of the many online calculators. Here I find out I need to save about $200,000 to pay for ONE of my children’s college expenses… WOW! My wife and I both work, are pretty frugal and decide that we can save about $500 per month. Unfortunately this will only cover one child’s total cost of college! Hopefully my kids get scholarships and grants to help out. Or maybe we supplement with some loans? Or we save $1000 per month. Unfortunately, the savings we have in our 529 plans can count AGAINST any aid that they get! And you have to use 529 savings for education. So after 22 years of saving, you hopefully will have one college education paid for, but will end up with $0 at the end. In summary, saving $1000 per month (I’ll need to save $1000 per month to pay for both children)  at 7% will be about $400,000 by the time my first child enters college in 2028.

What other options do you have? Instead of investing into a 2030 Target Fund with a projected return of 7%, I choose to invest in a commercial real estate project. I believe this will return around 12% over the course of the investment. After 18 years, my savings of $1000 per month will turn into about $750,000. It should produce 5 to 7% of TAX FREE income or about $45,000 per year, which should be enough to pay for each child’s education! What is the best part about this plan? After my children both graduate (debt free), we still have the income to supplement our retirement AND an investment worth around $1M.

How can we supercharge this plan? I was working as a W2 employee at the time and maxing out my 401k to the level where I got a full match from my employer. At the time this was around $18,000 per year. My wife is a self-employed architect and she was saving about the same in her SOLO 401k. So instead of saving $1,500 per month into her plan, let’s say we combined this and our monthly 529 Plan contribution into one $2,500 per month contribution? My investment turns into nearly $2M! Now I have a passive income of over $100,000 per year that will not only pay for BOTH of my children’s education by a comfortable margin, but I’m confident that with our 401k and other savings that we can retire off of this passive income by the time my children graduate when my wife and I are in our mid-fifties.

What options in real estate provide returns that beat stocks and bonds? I’ve invested in single-family rentals, private lending, spec homes, and commercial office space. However my favorite is multifamily residential (apartments). This space has given me a passive investment that yields:

• Cash flow

• Appreciation

• Unique tax benefits

If you’d like to learn how I used the Next-Level Income strategy to build a portfolio of passive income investments, you can get a free copy of my book and learn how to get access to cash flow investments.