Toronto’s real estate market has grown in leaps and bounds. Not only in the prices but also in the number of condo developments.
For the last number of years, we have had conversations with clients with younger children about the importance of their children’s future and the affordability of homes and condos. Many of these clients have discussed buying condos now for their children.
For those who can financially make this happen, it’s an excellent move. Purchasing a condo and renting it to good tenants for many years to come is a significant investment that will serve your child’s future.
Look To New York City
We all know that New York City is one of the most expensive cities in the World. It’s not uncommon for new residents of NYC to rent a 250-square-foot condo. Yes, you read that correctly. We have heard of some people sharing a 150-square-foot apartment to make ends meet as they build their careers. We bring up New York City because their condo has always been about 19 years ahead of Toronto’s real estate value. Knowing this creates great confidence about where Toronto’s condo market is headed in the coming years. Keep in mind that Toronto is the fourth largest city in North America, which means that we will be in demand for many years to come both for great quality of life and excellent job opportunities (two key fundamentals of real estate investing.)
Think The Real Estate Version Of The RESP
Many Canadian parents know that the Government of Canada offers Registered Education Savings Plans (RESP). This is a great investment tool when the parents of a child can invest up to $2500 a year, and the government will give up to $500 a year for a total annual investment of up to $3000 a year. This is a great investment tool for children who will attend post-secondary school. The money appreciates tax-free until the withdrawal date. Suppose the child decides not to attend a post-secondary school. In that case, the government reclaims their share (including capital appreciation), and the parents pay the taxes on the appreciation of the investment.
What do the RESP and a condo investment have in common?
Buying a 500-square-foot condo at today’s price will likely mean in 20 years that, the condo’s value will triple, if not quadruple. The significant upside is that the child has a roof over their head which could be paid off in full.
1. Similarity is deferred capital gains taxes.
2. Buying in at a lower cost.
3. Assistance of someone else paying into the fund (the tenant).
➤ Every good investment needs a well-planned strategy. Start preparing with:
- Are Condos A Good Investment?
- The Most Undervalued Condos In Toronto
- Condo vs House Investment
- Toronto Condo Guide
- Millennial Home Buying Trends
The Property Ladder
The child will benefit from inheriting a condo that is nearly paid off or paid off completely; financially savvy parents would be wise to refinance this condo into other condos and investments. Buying a condo that will appreciate is an excellent investment vehicle. The initial condo purchased for the child’s future in Toronto is the first rung of the property ladder. If there are multiple children, get started now and refinance along the way to purchase more condos. This approach is a little bit like the game of Monopoly; use the houses to trade up for hotels and secure a great financial future.
Toronto Has Great Universities
Toronto has some best-in-class universities and many well-rounded colleges to choose from. This condo is ideal if your child decides to attend a local university. If your child chooses to go elsewhere for post-secondary education, you know that other students and professionals would rent out an in-demand Toronto condo.
