Posted on Friday February 07, 2020

Buying a home for your child during their studies: A long term investment

Just yesterday they were learning to walk, and now they’re leaving home. With pride and a little pang of sadness, your child is embarking on a new chapter: student life. Thinking of helping them out by renting an apartment? But what if you bought instead? Here are 5 good reasons to purchase a place for your children, a trend that’s on the rise in New Brunswick.

Real estate: An investment rather than an expense

Putting money in your own pocket instead of someone else’s: now there’s a good reason to buy property! Buying a home for your child can turn a major expense into a long-term investment.

Investing in your child by keeping them free of student debt

By buying, you’re making an investment in your financial future and eliminating one of the main sources of student debt: housing. A new generation of parents is choosing pass the gift of peace of mind down to their children.

Making a profit

Depending on the real estate market where you’re buying, the value of your home may increase, making your investment more valuable. Surrounding yourself with competent professionals will help you make the right investment.

Your child’s heading to Moncton 

Good news! Moncton’s real estate market is in top shape! Stable, affordable, and growing steadily, the city leads Canadian urban centres for affordable home ownership, according the latest national statistics from the Canadian Real Estate Association. Greater Moncton has maintained the top spot year after year, making it a great place to invest.

When your children are finally ready to purchase their own homes, they can follow the example set by 21-year-old professional , proud owner of a duplex in Moncton. In an interview with Radio-Canada (French only), he explained that it was possible for him to invest in his future early because of the region’s unique real estate market.

Profitability: Time is the key

Every year counts and the longer your kids are in school, the better you’ll do. A few extra years often make all the difference when it comes to investing in real estate. As a general rule, it’s best to own a property for at least three years to make it profitable.

The longer you hold onto it, the more your investment will pay off. In order to maximize profits, some parents decide to rent out their property after their children have graduated. Some move into it themselves to be closer to the city or family, or simply as a retirement project.

Beware of hidden expenses 

It’s easy to underestimate maintenance costs when buying property. And that’s bad news for long-term profitability. Be realistic when assessing the work that will need to be done so you can include it in your calculations before going any further.

Loans and down payments: Important choices

Buying a house is a significant investment and a big long-term financial commitment. In order to properly structure your finances and draw up the best possible repayment plan, take the time to compare interest rates and mortgage offers from different financial institutions. Seemingly small differences of a few tenths of a percentage point can add up over the years. Choose a term and conditions that you’re comfortable with, based on your financial values and practices.

How to get your down payment together

For many parents a student home is a second purchase. If you have significant equity in your first property, you can use it as leverage to get the funds for a down payment. Your TFSA can also come in handy. Talk to a UNI mortgage specialist to determine the best course of action.

Want to teach your kids about the joys of saving? Get them involved by encouraging them to save up for the big purchase. My Savings Plan is for young people age 30 and under, and gives your children access to attractive rates, annual rewards, and incentives that help them learn in a simple, flexible environment. They can even use the platform to contribute to the family project, while taking advantage of all the perks.

Rental income

Your Guillaume likes to have his friends around? Great! He’ll always have help with the dishes, and you’ll have rent coming in each month. By buying a condo or house with more than one bedroom, you’ll be able to generate additional income that can help cover your mortgage.

Julie, the youngest, is getting ready to follow in her big brother’s footsteps? If you’re planning for your children to live together in the unit you buy, buying will save not one, but two rents. Aside from the odd squabble about whose turn it is to clean the bathroom, there are a lot of upsides!

In the summer, when the kids come back home, head out west to pick cherries, or go backpacking across Europe, you can also rent the property out to tourists or travellers. You may well find a taker on the Canada Stays website!

Teach your child about the importance of good investments

Helping your child stand on their own two feet is invaluable. By getting them involved in the purchase process, you’ll teach them about the importance of investing and making smart choices for the future. From shopping around to signing the purchase agreement, the experience will come in handy down the road.

If you buy an income property, you can also designate your child as the property manager. And if you want them to contribute to paying down the mortgage, they can use the money they invest as an eventual down payment on their own house. Some parents also decide to let their children make the down payment while they handle the monthly payments. There are all sorts of possibilities—it’s up to you to find the one that works for your family.

Knowing your children are safe and secure in a comfortable place that you picked out together is priceless. It’s a smart and strategic way to help them leave the nest and flourish with their newfound freedom. You may even have to give in to their sudden urge to paint the kitchen canary yellow!