What can I do? Living in 2 states (FL and IL)

Question

Current Situation

Own home for 5 years now in suburbs of IL. Owe $390k on mortgage. Can sell for $520k

Wife and I credit scores both in low 600’s due to cc consolidation a few years ago, still being resolved.

$50k in debt

Daughter is going to college in fall of 2023 in FL.

Not in a situation to leave IL at this time (work and family)

What do I do?

• Keep      living in existing home, pay out of state FL college fees.
• Downsize      in IL and purchase something very small in FL to take advantage of in      state tuition.
• Keep      current home, see if I can get some type of loan and still purchase small      property in FL to take advantage of in state tuition.

My other daughter has 2 years of high school left and will start college in fall of 2025 (pending FL). Would most likely move to FL then.

Edwin Epperson · Answer

@Bill Drutz great questions.  I'm not going to question you or your daughter's decision about where she wants to go to college, that's between you and her really.  Your questions did concern the strategies you are considering and some possible outcomes that will help you build a decision matrix.  If I may offer my humble and limited thoughts, as I do not have a child that is thinking of attending an out-of-state college, nor do I know all the ins and outs of you/ your family's financial decision.

1: Keep living in existing home, pay out of state FL college fees. (My thoughts) - Can you afford these expenses based on your household income?  More importantly, can these expenses be worked into your current budget without causing undue and unnecessary strain for you and the family?  Key considerations: Do you have more than one child that will be approaching the age that they will attend college within the next 4 to 5 years?  Can you provide for your other children the same way that you have provided for your daughter, again not placing undue or unnecessary strain on your finances?  What scholarships can she apply for/ work towards to reduce the financial strain, and can you make an agreement with her, that if you accomplish certain goals/ acquire scholarships then you would be able to support her decision?  I personally would think this is a great tool to teach goal setting as well you're letting her know you will work with her if she puts in the work herself.

2: Downsize in IL and purchase something very small in FL to take advantage of in state tuition. (My thoughts) - It sounds to me that you have $130K in equity in your property in IL.  If you were to sell it that would leave you approximately $80K in NET profit. (closing fees and Agent commissions assumed at around 10%). Since it sounds like you have owned the property for more than 1 year, your gains would be taxed at long term cap gains, which is a lower tax bracket, but still, you would be taxed.  I'm not sure what going rates and requirements are for a purchase of a primary residence in FL with your current DTI and credit score, so you should explore those options, and consult with a residential mortgage broker to find out what you could get.  Side note, you do have 2 yrs to #1 reduce debt and #2 improve credit score.  My belief is you will be in a much better position in 2yrs than where you are today, with a game plan in place.  That being said if you are able to qualify for an FHA loan, with 3-5% down 9please do not take my word consult a mortgage broker for DP requirements) your $50K (after taxes and other things could get you a BIG home in FL, depending on where you move and how far from an MSA's city center you live.  You could theoretically put 10% down on a $500K home ... that's nothing to sneeze at.  Though anytime your discussing moving you have to consider career options for you and other earners in the family.  I would also encourage you to consider a 1031 exchange.  I know this is used by real estate investors, and I'm most positive it can be used even for a personal residence but you would want to have a conversation with a Qualified Intermediary, I have two here in FL I could recommend and you can strategize with them your plans.

3: Keep current home, see if I can get some type of loan and still purchase small property in FL to take advantage of in-state tuition. (My thoughts) - While this may seem like the best "investment" option, you're still faced with downpayment requirements for purchasing a new home, and now your DTI will heavily influence what you could purchase.  In this case, you would more than likely be looking at a significant reduction in home size and location.  Again I am not your financial planner nor do I know your financial state.  If you go this route you will want to know what you could rent your property for in IL, and how much income that would add to your bottom line.  Also you will definitely want to calculate what your DTI would be as you begin searching for a new home in FL.

Final thoughts.  Consult and ask for advice, which you have taken here, and with plenty of runway.  2yrs out is a long time, and will give you the ability to put a plan in place personally, as a family, and with your daughter.  Several professionals I would highly recommend you consult with; your CPA, a financial planner (if you have one) Qualified Intermediary (to discover the power of a 1031 exchange), RE Agents in IL and in FL (ID agents that work and live in the areas you currently have a property and would be considering a property), and a mortgage broker.  I believe that if you make a plan, you can work the plan, and you will begin to see some progress towards identifying your path forward.  The best to you and yours, and God bless your journey.

PS - As a side note, I never attended college and I have done OK with my life, and I would never change it.  Encourage your daughter to pursue what her passion is, if that passion involves and require college degree(s) then by all means, but it may not, and that's actually perfectly OK.  Much success to you and your journey!

Bjorn Ahlblad · Answer

I told my kids they could not go to OS college unless they got a scholarship-athletic or otherwise. The extra fees are ridiculous! Just a money grab.

Daniel Johnson · Answer

Couple of things to think about.

1) you might not be eligible for in-state in FL, even if you move now. Most states have a “seasoning” requirement, and you must live in state for > 1 year before eligibility for in-state tuition. And worse, if your child starts, you might not even be able to get it if you move to the state. Do deep research on the state rules around this.

2) someone else talked about selling your current home and paying capital gains. That is very unlikely, since there is an exemption on capital gains if you have resided in the house for 2 out of the last 5 years.

Hope this helps.

Eddy Ogbekhilu · Answer

100% support John's point of view or position. How about in state community college to mitigate the high cost of out of state college. Readjust priorities and lower expectations  and let common sense application wins at the end of the day.

This is being said in the context of being financially responsible and chat a good course and not finding yourself perpetually struggling as a result of an oversight or lack of knowledge. Best of luck .

Mark Sue · Answer

Assuming you purchase a home in Florida, having a low credit score is going to cost you. I just ran a quick comparison in my region (Oregon), and on a $400k home with 20% down, the difference between a 620 credit score and a 740 score is 5/8% in interest rate and $3,000 in higher fees.

If I were in your situation, I would do the following:

- Wait a year or two for my credit to recover.- Send Daughter #1 to community college for a year (or two) to get her Gen Ed classes for little-to-no cost. Then she can transfer to the big, expensive school of her choice to finish her degree if she wants.- Advise Daughters to achieve their career dreams without crippling themselves financially by going to expensive schools. There are much more affordable options out there.

What can I do? Living in 2 states (FL and IL)

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