Buying Investment Real Estate For Your Kids Is A Good Idea

Published by Frank on January 15, 2012

During the eighties, some parents used to get their children a vehicle once they finished secondary school.   Nowadays, a few parents take the graduating gift a measure further and buying condos for their children. However is such a large present actually helping them?

 

Exactly why are mothers and fathers getting condo properties for their older kids rather than Toronto houses for sale or any other investment options? For some parents, it really is the peace of mind of realizing that the kid will not need to spend a fortune for a sufficient apartment. While a few parents are viewing it as a way for their kids to discover how to take care of themselves and of a home. 

 

Canada is among the nations where this development is most common. A number of parents are purchasing brand new condominiums for their kids attending university or college, as seen inside the Asian community in the GTA. Several condominium developers are even offering benefits that happen to be especially developed for mothers and fathers getting their child a unit, as observed in Montreal. 

 

When your child attends university in a different city, college student lodgings could be crowded and costly that’s provided fuel to the fire of parents buying condos for their kids. In a few circumstances, parents may acquire houses big enough so that the kids can get room mates, or tenants in a basement flat, to help with the monthly expenses. 

 

It goes without saying that location remains a essential element in this kind of real estate investment. You need to bear in mind how easy it will be to rent the property as soon as your child leaves. Additionally, would you recoup your investment or perhaps earn money in the event you chose to sell the residence after your kid finishes college?

 

Another thing to think about are the tax implications of getting a condominium for your kid. Purchasing the residence under your personal name will subject it to capital gains tax. Only one property can be designated as the principal home of an adult in Canada every year. One advantage of having the condominium yourself is the fact that if your kid is married, or gets married, and afterwards divorces, the residence will remain yours and the divorcing husband or wife won’t be entitled to virtually any share of the value of the condo. 

 

An additional selection would be to supply your child the funds to buy the property. There’s no capital gains tax once the residence is sold, nonetheless, in the event of a divorce, the property just isn’t guarded from equalization obligations for the other partner.  On the other hand, you could lend your kid the money through a mortgage loan. To steer clear of creating taxable revenue, the loan will have to be zero interest. This method guards you and your child from capital gains taxes and equalization repayments. 

 

So whether you decide to buy your kid a condo as a good investment for you or even to save them the cost of leasing a flat, consider all the ramifications of such a transaction.