Do you think Toronto real estate is expensive now? Wait until your kids are grown up and returning from university. Historically speaking, Toronto’s values have doubled every 12 years.
Don’t believe us; look at New York City’s real estate prices…we have always been approximately 19 years behind them in values. Manhattan is unattainable for the average person. These seemingly impossible values are coming to our city.
Whether we like it or not, it’s a likely reality. Investing in real estate now is key to a secure future.
Toronto is the 4th largest North American city, with more than 300,000 people arriving yearly. They need housing, are educated, and will drive the economy higher in Toronto. You can expect at least a doubling in value in the next 2o years, and frankly, we expect as much as two doublings of today’s real estate prices in that time.
It’s wise to consider housing options for our children ahead of time. They will not have the comparative “ease” (using this word lightly as it wasn’t actually “easy” at the time but looking back on that time, it was easier than today) we had when entering Toronto’s real estate market. We may have purchased a detached home for $500,000 – that is now worth $3 million. Incomes haven’t kept up. With all this in mind, it’s essential to consider the time value of money. Get that money/investment working for you, so your children’s real estate future in Toronto is secure.
Guide to Buying and Selling Real Estate With Kids
Use Equity Growth In Your Home
Those fortunate enough to own a home or condo in Toronto’s real estate market have a great opportunity they can unlock. Assuming that you (the homeowner) have grown your home’s equity, you have an excellent opportunity to borrow from yourself in a Home Equity Line of Credit (HELOC.) This involves having your property appraised (by a bank/mortgage lender appointed), then setting up a HELOC with a particular amount of instantly accessible capital (equity), which can be borrowed at a cheaper rate than an unsecured line of credit. Using this capital to purchase a property (as a downpayment) can allow capital leverage to take hold. When you borrow money to invest, you can write off the interest. It’s also worth noting that HELOC only requires interest payments. In time you can refinance the investment property to pay back all or a portion of the HELOC. We say “portion,” as it may be wise to use the capital growth in the investment property to purchase another property. This is how people become wealthy real estate investors.
Why Parents Should Invest In Condos For Their Children
Get Pre-Approved
Speak with a mortgage broker to understand your options. You will need to get a home appraiser into your home so that you know how much your home is worth and that the bank knows how much it can lend you. As you understand the numbers, you will see the cost associated with borrowing in different increments.
How Much Money Down?
Once you have accessed a Home Equity Line Of Credit (HELOC) and you have pre-approval, it is time to turn to how much money you would like to invest. Have the rents cover the mortgage, HELOC interest, taxes, insurance, etc. Do not be too conservative with the downpayment, do your best to leverage the investment with “other people’s money,” i.e. the Bank/lender; you want as large of a mortgage as you can manage (while considering your downside.) The larger money is because you want to write off as much of the interest as you can; you don’t need to be paying taxes on profits. Leverage it more to maximize your Cash on Cash Return.
➤ Every good investment needs a well-planned strategy. Start preparing with:
- Toronto Real Estate Investing FAQs
- Are Condos A Good Investment?
- The Most Undervalued Condos In Toronto
- Condo vs House Investment
- Toronto Condo Guide
- Millennial Home Buying Trends
- Condo Investing Mistakes
Type Of Real Estate Investment
This is the best financial option if you can manage the acquisition cost of a triplex or more units, for that matter, as the rents will typically cover the investment. As you can imagine, the next best option would be a duplex, a single-family home, and a condo. The condo is a more straightforward investment requiring no snow movement, less upkeep, and fewer things breaking because most condos are relatively new. Low maintenance is a preference for some investors.
Hire A Trusted Realtor With Contacts
We cannot emphasize this enough. There are over 66,000 realtors in Toronto. You must choose wisely. Very few know how to handle this well and have the experience to guide their clients. We pride ourselves on encouraging powerful conversations to ensure you have the knowledge and insights to make great decisions. We are the real estate strategy advisors for life. Take the time to find suitable real estate agents in Toronto. We would be happy to chat – but we want people to find the right fit. We build trust so that our clients can rest assured that things will go as well as one could dream of.
Selling Real Estate
Please don’t fret about the size of the space for now or whether it will be an ideal living space for your adult children. This is about creating an investment that can be leveraged, sold off or developed to best suit the needs of the adult children in the future. It could also become a fund that pays our dividends. Many incredible options exist once you embark on this real estate investment journey. There will come a time when a sale will be necessary. Estate planning can cover these elements so that it is handled in the most tax-friendly manner. If you own one or two investments, it is not hugely impactful. We strongly suggest that you begin taking action and get invested. You will have years to figure out how to address a sale. That said, if you wish for more clarity on this front, we have a great accountant who can guide you. We have found that one of two investments in real estate has not been a concern for clients when it comes to taxation, as their children are many years away from accessing capital growth.
Contact Us Today To Begin Investing
Key Takeaway
We appreciate that real estate investment is not for everyone. We don’t mean to oversimplify the process. There are always elements that you should keep in mind. Specifically, this should be considered a business (we have seen many other people cut corners, and it has pinched them in downturns, we help clients assess the downside and find their solutions BEFORE an issue occurs.) A business that you regularly monitor, that you make improvements to. We have helped many clients achieve independent wealth via real estate. We know what it takes. It is essential not to overleverage yourself. Pace yourself. If today is not the day, that’s okay. But don’t drag on a decision. Begin the research, prepare your budget, take action, and place your effort into the necessary steps and timeline to achieve the real estate investment goals. After all, what better reason than to provide financial security for your children?
