Sometimes a parent decides to buy a place for their children while they hit the books in university or college. It can be a good alternative to paying thousands of dollars toward residence fees or rent. Just look at the math:
Student rent of $500 a month = $6,000 a year = $24,000 over 4 years of school.
That money could go to your mortgage instead as an investment for you.
In Kelowna, for example, you can buy an NEW one-bedroom condo for about $195,000. (HST included!) Or, buy a 2-bedroom for $240,000 and let your child's roommate help cover the mortgage by paying rent. Let's assume you pay 20 per cent down. Here's an example of what your monthly costs could total when mortgage rates are low:
- The rental income you charge can pay a lot of your costs. Just remember you have to declare that income on your tax return.
- As a landlord, you can also claim many of your expenses, including mortgage interest. Assess your costs carefully before you buy. They will vary with the local real estate market, mortgage rates and other factors.
- Plan for some vacancies. Your child (or their roommate) may not stay in the condo over the summer break. Are you really going to ask them to pay rent if they are living somewhere else for a few months?
- Remember that you will own a greater share of the equity as you pay off the mortgage. And, the value of the condo may rise over time. This can offset your costs. But whether you do more than break even depends on what happens to housing prices in the area.
But there are other reasons you may decide to go ahead. At the very least, you can provide your child with a nice place to live in a good neighbourhood while they go to school.
Century 21 Assurance Realty (Kelowna)
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