The General Thought...
Student accommodation for an out-of-town university or college is at least $30,000 more than the cost for students living at home for a four-year program. If you are 'footing the bill' to have one or more children attend university, this can really add up to a lot of money.
Invariably, the thought comes up about buying a property instead of paying rent for on- or off-campus accomodation. You make a mortgage payment instead of paying their rent with the intention to sell the property after graduation, perhaps in five to seven years. During the university years, the mortgage balance decreases and hopefully the property appreciates. Done right, there could be a decent profit to re-coup expenses incurred toward your kids' education.
Other opportunities to save money might be lower cost home-cooked food vs. cafeteria food. Further, if there is an extra room or two, bringing in other student friends to pay something to offset property operating costs such as taxes, utilities, insurance and maintenance will make the numbers look much better.
Important - In addition to the considerations on this page, please make sure you can mortgage-qualify under the new rules! "To mortgage qualify, you need sufficient Income, Credit, and Equity (I.C.E.)" |
Considerations:
Let's look at an example where you have 2 kids that will attend University, 2 years spacing, and you plan to buy a place with 4 bedrooms. Keep in mind that there may be some vacancy during summer months, when students often go home.
Add 'em all up: $115K (profit on sale) LESS $163K (operating expenses) PLUS $130K (rent earned or avoided) = $82K profit before taxes (taxes would be ~$12K; 20% on the $60K capital gain ).
As you can see, there could be some reasonable profits that make this strategy worth exploring.
Please contact us if you have more questions on how this strategy might work in your situation. Below, we talk about the mortgage lending options...
As licensed professional mortgage brokers, we know exactly what it takes to qualify you for a mortgage and we do more than just get you a great mortgage at a great rate, we will show you the way, too.
For mortgage purposes in Canada,
If you or your client, friends or associates have any questions on this or any mortgage situation or need, please feel free to contact us.
Important - In addition to the considerations on this page, please make sure you can mortgage-qualify under the new rules! "To mortgage qualify, you need sufficient Income, Credit, and Equity (I.C.E.)" |
Richards Mortgage Group
73 Riverview Circle
Cochrane, AB T4C1K3
T: 587.774.6290
TF: 1.888.540.1715
Fax: 587.315.6117
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