Knowing that more than two-thirds of post-secondary students in Canada plan to live somewhere other than their parents’ home while studying and that it is often their parents who foot the bill, have you estimated how much this will cost you?
While many parents opt for rental properties, some choose to invest by purchasing housing to accommodate their child during his or her studies. But when does it make sense to make this choice? Ask yourself the following five questions to make your decision.
1. What are the characteristics of the local market?
The choice will partly depend on the location of the educational institution. Prices are likely to be higher in a large urban market than in a small town. Is the market volatile or stable? Do your research first.
2. Do I want to have tenants?
If you plan to rent out part of the home to your child’s roommates, inquire about the logistical and legal aspects of being a landlord. Are you willing to take on the maintenance of the home? What do you do if someone doesn’t pay their rent on time?
3. How long do I plan to keep the property?
Do you plan to sell the home when your child has finished school, or will you continue to rent it out? It may be more profitable to keep it as a rental investment. If it’s in a college town, you generally won’t have trouble finding tenants.
4. Who benefits from it?
Is this a short-term purchase, or do you have other children who may attend the same school? Develop long-term planning and consider keeping the home longer to get more value from it.
5. Have I done all the necessary calculations?
Calculate the breakeven point. Don’t forget to take additional costs into account, such as maintenance, repairs, taxes and insurance. Also avoid using your retirement savings to make this investment if it will jeopardize your financial future.
This article is intended to provide general information only and is not intended to provide legal, financial or other professional advice. Please consult a professional advisor regarding your specific situation. The information presented is believed to be factual and current, but we cannot guarantee its accuracy and should not be considered an exhaustive analysis of the topics discussed. The opinions expressed reflect the judgment of the authors as of the date of publication and are subject to change. Royal Bank of Canada and its entities neither expressly nor implicitly promote the advice, opinions, information, products or services of third parties.
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