Look - you can use your 529 fund for anything in the world you like - you pay the taxes and 10% penalty and it's yours free and clear.
We were walking a thin line with the original post here, now you want to just take the money when the child is not even going to the school for some years?
So, let's see what you're contemplating here:
- Contribute to the 529
- Take state tax deduction on the contributions
- Earnings grow tax free
- In a few years, with the money that's built up, we'll just take some of the money and buy some real estate (without any taxes or penalties or interest on the amount taken)
- Maybe use the money to buy a personal residence
- In two years, once we qualify for the $250k/$500k exclusion on sale, we'll sell it.
- Maybe we'll put the 529 money back after we sell the property.
Have I got all that right?
The simple answer to your question - NO.
Try Google: 529 qualified withdrawal