Lots of parents dig into their pockets for a laptop or an iPhone when school starts in the fall. Some, however, take matters a step further. They invest in real estate that their kids can live in while they hit the books.
Jeremiah Ing is a fashion connoisseur who co-ordinates the office workings of a major cosmetic company and lives in a cool one-bedroom condo in a building that doubles as a hotel, next to a theatre in the heart of downtown Toronto. His decor? White, lots of white, right down to his cat, Portia. A few years ago, when he was a student at the Academy of Design and Technology, his parents helped him purchase his 600-square-foot unit with floor to ceiling bedroom windows so he could put the money for student accommodation into equity. "I was choosing fixtures and flooring at 18," he recalls. "I couldn't even get into the bar downstairs, but I had a lot of responsibility. I didn't have wild parties. My place was brand new and I wanted to take care of it."
In the long run, "I hope to be able to sell my place at a profit and buy something bigger," Mr. Ing says. "We paid about $205,000 and the units are selling for thirty or forty thousand more now."
"Do the math," says real estate broker Dorothy Wong of Re/Max Goldenway Realty Inc., pointing out why some parents make this kind of back-to-school purchase. "If the university student is paying $1,000 per month, then one year will cost $12,000. Four years adds up to $48,000 towards someone else's mortgage. If the parents use the funds as a down payment instead, they have a real estate investment with a guaranteed tenant: their children. Not a bad deal."
Camilia Salem would agree. Ms. Salem, whose professional responsibilities include bookkeeping and computer management, is looking for a condo for her son Philipe, about to start his first year at Ryerson University as a bachelor of commerce student with a major in hotel management. "I think spending hundreds of dollars every month on residence is a bit of a waste of money …," she says. "I bought a condo at Harbourfront for my older son, Maurice, for $161,000 when he was a student at George Brown College and we sold it two years later for $30,000 more. We live out of town, and this way, my son will be able to walk to school, go home for lunch or between classes and use his time effectively. He is selling his car and putting the money he has been paying for insurance and other costs towards the monthly payments and I expect he will work part-time to pay for his food and living expenses."
Monika Merinat, a broker with Toronto's Coldwell Banker Terrequity Realty, runs through the economics: "If someone buys a $150,000 bachelor in a building like the Pantages with 10-per-cent down, the mortgage is $135,000. Amortized over 35 years at an interest rate of 3.7 per cent, the monthly payment is $571. Add condo fees and taxes, and the cost will be about $900-$950 for a spacious place with kitchen, own laundry, bathroom, a minute from Ryerson," she says.
Not all the buyers are looking for condos, either. Some, such as Wayne Habbib, who helped his daughter Monique buy a property near Brock University in St. Catharines, Ont., opt to buy a bigger home, renting out the extra bedrooms to other students. This can be an added educational experience. "My daughter learned what owning property and having a mortgage is all about," Mr. Habbib says. "She knows now what it is like to be a landlord - six young women share the place."
Mr. Ing, who was from Tecumseh, near Windsor, Ont., found having a place he owned in Toronto gave him a sense of belonging. "I was alone, and had left the home I grew up in," he says. "We looked at about 10 properties when we made the purchase. The decision was at least partly based on having a place that is right downtown. And the fact that the building doubles as a hotel is very convenient too. My parents are visiting this weekend, and they will stay in a hotel room right across the hall."
Special to The Globe and Mail